Where will tariffs and inflation be found in the next year? Fitch’s Chief Economist provides an overview of the forecasts that bothers you

Trump’s tariff agenda backfires. Interest rates and inflation are stubbornly high. And sometimes stagflation is set.

This is a take from Brian Callton, the chief economist at Fitch Rating, a leading provider of credit analysis in the global market. The writer discovered that Coulton’s views are highly rooted in data, logic and historical precedents. On April 17th, I spoke to London-based Coalton over the phone. Coulton’s increasingly negative outlook for the US is summarised in how he answers five key economic questions.

Will the tariffs stay here?

Coulton pointed out that the “mutual” tariffs on “Liberation Day” announced by President Trump on April 2 are “a much worse than expected.” He has now put the current average US tariff at 23%, with an average of over 2.2% last year.

Coulton believes that today’s triple digit duties in China will last “for a while” before falling to around 60% by 2026. Otherwise, 10% predict that it will be “the best that any country can expect.”

Economists believe that the president is fully committed to high tariffs as a good economic policy despite claims that Trump is striving to build a deal that is favorable to our trading partners. “Taxes are not a bargaining ploy,” he says. “Trump thinks the trade deficit is a bad thing.” He is interesting to note that the president has been hit 10% in the UK, Singapore and other countries where the US operates the surplus. That policy means that cutting the country’s exports to the US makes sense, even if they sell more than they ship to us, lowering the overall trade shortage. The Singapore and the UK example assume Colton, “a country that is unlikely to have rare exceptions can offer anything to get a fee of less than 10%.”

Who pays the customs duties?

“Let’s say you’re a Chinese exporter and face 60% tariffs,” says Coulton. “The wholesale price of US midleman or distributor, or a large company that directly imports, can be reduced to US ports of entry, keeping the prices the same for consumers, and not losing market share. However, he adds that the Trump tariff round and Chinese records of the 2018 and 2019 shows did not happen. “A detailed study looked at whether Chinese exporters lower pre-tax prices to intermediaries such as US importers, wholesalers and distributors. If exporters are absorbing tariffs, they can see that the prices of goods arriving will fall.” Instead, the prices charged to US importers rose in parallel with the increase in tariffs. “Data from the US trade representative website shows that trend,” says Coulton.

How about the distributors? The numbers show that these wholesalers absorbed some of the tariffs, but less than half, absorbed like a third. “The evidence is that importers have hit the margins a major blow,” Coulton points out. Still, it was US consumers who paid most of the customs “tax” at the checkout counter. Coulton hopes shoppers will cover the biggest part of the bill this time.

Will tariffs hurt economic growth?

In December, Coulton predicted that US GDP would slow to around 2% in 2025, on the way to the end of the year with a strong profit of 2.8%. “Think about tariffs like tax increases,” he says. “One-quarter of the total US consumer spending on products will be devoted to imports. Taxes on all products above 2% will likely be around 18%.

Results: “Import prices rise faster than wages,” says Coulton. “The same wage will buy less. If ‘actual income’ decreases, consumer spending will decrease and GDP growth will decrease. “He says that even if importers were responsible for most of the tariffs, higher costs would reduce their margins. “So, that’s still a loss inflicted on the US economy,” he approves. “Companies cut. Low profits mean less investment in plant construction and renovation, fewer workers and even more restraining consumer spending.”

How much concern is stagflation?

A new concern for Coulton is the growing possibility of a stag. It was a horrifying phenomenon that the United States suffered in the 1970s, and Europe endured it over the next decade. It is the worst of both worlds, a combination of high inflation and rising unemployment. “At this point, the US is not being made into a stag,” says Coulton. “But it’s not that we’re going to say that as businesses cut their investments, we’re heading towards rising consumer prices, higher inflation and higher unemployment. But that’s a big threat. That scenario is much more reliable than a month ago.”

Will tariffs reduce the trade deficit?

Trump’s Holy Grail is reducing our export and import shortages. He believes that the gap will lower the US living dollar dollar dollars by dollar, and transfer all “wealth” worthy of freeroad trading partners. But Coulton doubts that Trump’s plans will do much to close the Gulf Coast, while also stacking huge new costs for the economy. He says the policy could lower the trade gap “by margin” by costly on imports and therefore moving sales to domestic producers. However, he doubts that our makers and foreign players will act quickly and significantly increase their capabilities, which is the central forecast of the Trump initiative. “For foreigners facing major tariffs, the question is how quickly they will move to the US, a massive decision. Perhaps that won’t happen quickly,” Coulton says.

On a macro level, he observes, and the US is spending and investing much more than it saves. While businesses generate enough profits to fund their maintenance, the government’s deficits overpower these private “savings” and are forced to attract a huge amount of capital from overseas to the US. But the course is made in Washington, D.C. and by voters. In fact, it’s the US decision to spend much more than explaining why we have to buy from far more countries than we buy. So, surplus in dollars is only good here, which can fund budget shortages.

If Coulton is right, Trump is certainly changing the US economy. Most are in the wrong direction.

This story was originally introduced Fortune.com