Bank of America: Beware! Behind the tariff arithmetic, the United States is facing greater inflationary pressures.

date
24/07/2025
According to the Zhimeng Financial APP, Bank of America believes that if the tariffs scheduled for August 1st are implemented, there will be a greater and more sustained risk of inflation shock, which will continue until 2026, with core personal consumption expenditures peaking at around 3.5%. However, in this scenario of tough tariffs, Bank of America would be more concerned about the risk of non-linear effects. In some indicators, including the Michigan survey, inflation expectations have already deteriorated, and the significant cost-push shock may also prompt more businesses to raise prices. According to menu cost theory, more businesses may find that adjusting prices to cover fixed costs is optimal. At the same time, the impact of the shock on economic activity will be amplified, potentially leading to a true stagflation.