Jonathan Levin warns tariff inflation impact could peak around 2027

Jonathan Levin, a Bloomberg Opinion columnist covering US markets and economics, is making the case that investors have already mentally filed tariffs under “priced in” when the real inflation consequences haven’t even arrived yet.

Levin’s argument is straightforward but uncomfortable: policy decisions being made right now on sustained or increased duties could generate inflationary pressures that don’t fully materialize until 2027. That’s a two-year lag between cause and effect, which is roughly an eternity in markets that can barely remember what happened last quarter.

The tariff time bomb

Levin has been tracking these dynamics since at least 2024, analyzing how tariff effects ripple through inflation data with a meaningful delay. His conclusion: the tariffs instituted or expanded during the Trump administration are still working their way through consumer prices, and the full impact could peak around 2027.

He also draws an important distinction about tariffs as policy tools. They’re frequently framed as negotiating leverage rather than a permanent tax on imports. That framing matters for political messaging, but it doesn’t change the economic reality. Whether a tariff is meant to be temporary or permanent, it still exerts upward pressure on prices while it’s in effect.

What the bond market is whispering

Market projections for interest rates in 2026 and 2027 are being shaped by inflation data and tariff effects, according to his analysis.

This matters enormously for the Federal Reserve’s path forward. The Fed has been navigating a delicate balancing act: trying to bring inflation back to target without cratering the economy. If tariff-driven inflation is still building rather than fading, it complicates the timeline for rate cuts that many investors have been banking on.

Why the lag matters for investors

Almost nobody is positioned for a second wave of inflationary pressure arriving in 2027 from decisions that were made in 2025.

Interest-rate sensitive sectors face the most direct exposure. If inflation runs hotter than expected in 2027, the Fed may need to keep rates elevated longer or even reverse course on cuts. That scenario would pressure real estate, utilities, growth stocks, and anything else that benefits from cheaper borrowing.

For anyone building an investment strategy that extends beyond the next few quarters, the interaction between US tariff policy and inflation deserves more attention than it’s currently getting. The market may have moved past tariffs. The economy, by Levin’s account, has not.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.