• President-elect Donald Trump said he would impose tariffs on imported goods.
• Economists said the proposals could spur inflation and raise prices for consumers.
• The Federal Reserve would likely respond to inflation by raising interest rates to curb demand.

One of the first measures President-elect Donald Trump is expected to implement after taking office is to impose taxes on imported goods.

Many economists say these tariffs, as well as some of his other proposals, could trigger a further rise in inflation and interest rate hikes.

Trump has said his proposals would have no impact on U.S. prices. “I will impose tariffs on other countries coming into our country and it has nothing to do with taxes on us. This is a tax on another country,” he said in a speech in August.

Some experts have argued otherwise. Economists and investors expect the taxes levied on imports to be passed on to American consumers in the form of higher prices. In an economic chain reaction, households would then pay higher interest rates on loans of all kinds as the Fed tries to curb reignited inflation.

The increase in tariffs from Trump's first term is expected to put a strain on Americans' wallets

One of the cornerstones of Trump's election campaign proposals was a 60% tariff on goods imported from China and a tariff of 10 to 20% on imports from other countries.

The U.S. Census Bureau reported that broad tariffs would likely impact prices for automobiles, drugs for human and veterinary use, food and beverages, furniture and household appliances.

Trump could announce these changes when he takes office because they do not require congressional approval. However, because implementation could take time, consumers would not see higher prices immediately.

An analysis by the nonpartisan Peterson Institute examined Trump's proposed 60% tariff on goods imported from China and estimated it would boost inflation by 0.4 percentage points in 2025. The estimate does not take into account Trump's proposal for a 10% to 20% tariff on other imports.

Even under Trump, the markets expect higher inflation; Bond yields rose after Trump's victory. This led to an increase in the interest rate on 30-year fixed-rate mortgages, which led to an increase in homebuyers are on track to see higher loan interest rates.

An analysis by the nonpartisan Tax Policy Center found that Trump's policies would reduce after-tax income by an average of $1,800 in 2025. A separate analysis by the left-leaning Center for American Progress said its tariff plans could cost the typical American household an additional $1,500 per year.

Tariffs are typically used to increase government revenue and strengthen domestic production. Trump signed it into law in his first term as part of his “America First” policy, including a 25% tariff on Chinese goods that ultimately led to it led to a trade war between the two economies. Although they did not have a significant impact on inflation, they did increase taxes for consumers. The Tax Foundation estimated that Trump's tariffs during his first term amounted to a nearly $80 billion tax increase on Americans who bought Chinese imports.

Trump's victory is also expected to influence the Federal Reserve's upcoming interest rate decisions. While it is still too early for the Fed to make any adjustments since Trump has not yet imposed tariffs, members of the Federal Reserve's Federal Open Market Committee will likely begin discussing how Trump's future economic policies could affect consumers – including the Question whether the central bank would need to raise interest rates to raise interest rates in response to inflationary pressures in the future.

The Fed is expected to cut interest rates by 25 basis points on Thursday, and Fed Chairman Jerome Powell is likely to provide insight into the Fed's direction following Trump's victory.

However, the future of the Federal Reserve under Trump is uncertain. The president-elect has previously indicated that he would like to have a say in interest rate decisions, something presidents currently don't have. This raises the question of whether the central bank would remain politically independent.

As the year draws to a close, Americans will likely learn more about what to expect from Trump. While Trump has claimed that his policies will help the economy and give Americans a better future, Nobel Prize-winning economist Joseph Stiglitz previously told Business Insider that the “general consensus” among experts is that “the Trump government would be more inflationary.”

“The general assessment of the consequences of this is that the Fed would be forced to raise interest rates and that all of this would still lead to a rise in inflation even as unemployment rises and GDP slows,” he said.