Recent findings from the Peterson Institute for International Economics and Lazard suggest that the cost of living in the United States may increase more rapidly than previously anticipated. This rise is attributed to a combination of import tariffs, a tightening labor market, and elevated public spending, which could counterbalance the deflationary effects of productivity improvements driven by artificial intelligence. The source notes that these factors could significantly impact consumer prices in the near future.
Impact of Tariffs on Inflation
The research emphasizes the lagging effects of tariffs imposed during the Trump administration, which are expected to contribute an additional 50 basis points to headline inflation by mid-2026. This delayed impact underscores the complexities of trade policies and their long-term implications for consumer prices.
Labor Shortages and Wage Increases
Moreover, the potential deportation of workers in industries reliant on immigrant labor could lead to significant wage increases. As labor shortages intensify, businesses may face upward pressure on wages, further fueling demand-driven inflation. These factors collectively paint a concerning picture for the future of living costs in the US economy.
The US labor market has recently faced significant challenges, concluding 2025 with the slowest job growth since the pandemic. For more details, see the full report on the labor market.
