US Tariffs, Inflation & Interest Rates Explained: A Beginner Investor's Guide (2025). Curious about how US tariffs impact inflation, interest rates, jobs, and markets? This beginner-friendly guide breaks down key economic indicators, including CPI, Core PCE, unemployment, and 10-year yields – and what they mean for investors in 2025.
New to investing? Macroeconomics can be overwhelming, but we've got you covered! This guide explains terms like inflation, bond yields, tariffs, and unemployment using real 2025 US data. Learn how government policy (especially tariffs) connects to the economic indicators that matter most for investors.
Markets do not move on headlines alone. Over time, asset prices respond to:
Inflation trends
Interest rates
Employment conditions
Government taxation and spending
In 2025, US tariffs became a major macroeconomic talking point, so understanding their impact helps explain movements in stocks, bonds, and currencies.
A tariff is a tax placed on imported goods. When goods enter the United States, US importers pay the tariff to the US government.
In FY 2025, tariffs generated approximately USD 195–280 billion (pending reliable data), the highest level in modern US history.
Tariffs are not paid by foreign governments.
They are paid by US companies.
Passed on to consumers through higher prices.
To understand scale, compare tariffs with other revenue sources:
Individual Income Taxes
Share of Total: 50.7%
Payroll Taxes
Share of Total: 33.4%
Corporate Taxes
Share of Total: 8.6%
Customs Duties (Tariffs)
Share of Total: 3.7%
All other receipts
Share of Total: 3.6%
Takeaway: Even at record levels, tariffs are a small part of total US government revenue. They cannot replace income taxes or payroll taxes.
By origin of imports:
China: 45–50%
European Union: 15–20%
Mexico: 10–12%
Canada: 5–7%
Other Asian countries: 10–15%
But economically:
70–90% of tariff costs are paid by US businesses and consumers, not foreign exporters.
This is why tariffs directly affect inflation and household purchasing power.
Tariff revenue is concentrated in areas that matter for everyday prices:
Consumer goods (electronics, appliances): 30–35%
Industrial inputs (steel, aluminium, chemicals): 25–30%
Automobiles and auto parts: 15–20%
Machinery and capital goods: 10–15%
Agricultural products: 5–10%
Why this matters: When tariffs target consumer goods and industrial inputs, prices rise across the economy, not just in niche sectors.
Measures the change in prices paid by consumers.
Tariffs raise CPI by increasing the cost of imported goods.
Higher CPI reduces real purchasing power.
Live US Consumer Price Index (USCPI)
Excludes food and energy to show underlying inflation.
Core CPI stayed elevated in 2025, showing tariff-related price pressure.
Live US Core Consumer Prices (USCCP)
Live US Core Inflation Rate YoY (USCIR)
Core Personal Consumption Expenditures. The Federal Reserve’s preferred inflation measure.
Core PCE remained above the 2% target in 2025.
Sticky Core PCE makes interest rate cuts less likely.
Live US Core PCE Price Index Annual Change (USCPCEPIAC)
Live US Core PCE Price Index (USCPCEPI)
US - PCE Price Index (YoY) (macromicro.me)
Shows labour market strength.
Unemployment rose modestly in 2025.
Higher costs and lower margins reduce hiring.
Live US Unemployment Rate (USUR)
Represents long-term interest rate expectations.
Yields around 4%+ signal:
Persistent inflation risk
Tighter financial conditions
Higher borrowing costs for businesses and households
+USD 200–280bn in annual revenue
Modest deficit support
Higher consumer prices
Higher business input costs
Lower real income growth
Reduced economic efficiency
In simple terms: Tariffs help government revenue but hurt economic growth.
Tariffs make inflation harder to reduce.
This keeps interest rates higher for longer.
Higher inflation → higher bond yields.
Long-duration bonds face headwinds.
Negative for:
Retailers
Automakers
Manufacturers with thin margins
Better for companies with pricing power.
High tariff revenue does not mean a strong economy. For investors, it often signals higher costs, slower growth, and tighter financial conditions.
Tariffs raised record revenue in 2025 — but only ~4–5% of total US revenue
Most tariff costs are paid inside the US
Tariffs increase inflation and reduce efficiency
Inflation, interest rates, and employment matter more than headlines
Understanding macro indicators helps you invest with confidence
The analysis above draws on data and research from:
US Bureau of Economic Analysis (BEA) – https://www.bea.gov
US Bureau of Labor Statistics (BLS) – https://www.bls.gov
Federal Reserve – https://www.federalreserve.gov
Trading Economics – https://tradingeconomics.com
Committee for a Responsible Federal Budget – https://www.crfb.org
Yale Budget Lab – https://budgetlab.yale.edu
Tax Policy Center – https://taxpolicycenter.org
PBS NewsHour – https://www.pbs.org/newshour
TIME Magazine – https://time.com
SPX: S&P 500 Index: 500 large caps - Market-cap - Core US benchmark
IXIC: Nasdaq Composite Index: Market-cap - Weighted - 3,000 equities
NYSE Composite Index: All NYSE stocks - Market-cap - NYSE-wide view
DJI: Dow Jones Industrial Average Index: 30 stocks - Price-weighted - Media reference
RUI: Russell 1000 Index: Large caps - Market-cap - Institutional benchmark
RUT: Russell 2000 Index: Small caps - Market-cap - Small-cap performance
Wilshire 5000 Index: Total US market - Market-cap - Total market exposure
S&P 500 Equal Weight Index: Large caps - Equal weight - Breadth analysis
S&P 500 E-mini Futures (ES1!) - Core US market direction
Nasdaq 100 E-mini Futures (NQ) - Growth and technology sensitivity
Russell 2000 E-mini Futures (RTY) - Small-cap and domestic growth signal
VIX Futures Index: Market fear expectations
US M2 Money Stock (M2) USD: The total supply of cash (liquid and near-liquid) money in the US economy.
US Gross Domestic Product % (GDP) Rate: Measures the total value of all goods and services.
US Gross Domestic Product $ (GDP) USD: Gross domestic product (GDP), the featured measure of U.S. output.
For 2026, real GDP growth is projected between 1.8% and 2.6% by major institutions like Vanguard and Goldman Sachs.
US Government Debt (USGD): The United States government debt. $38.5 trillion as of January 2026.
US Government Budget Ratio (USGBP): Payments received and payments made by the government.
US Consumer Price Index 2026 (CPI): Jan 2026 - Inflation across a basket of goods and services.
US Core Inflation Rate YoY % (CIR): Excludes volatile food and energy prices.
US Core Consumer Prices 2025 (CCP): Dec 2025 - Inflation across a basket of goods and services.
The PCE is the most important inflation metric for policy.
US Core PCE Price Index (PCE): Core Personal Consumption Expenditures.
US Core PCE Price Rate % (PCE): By product type, PCE can be classified into goods (35%) and services (65%).
Core PCE Index, is expected to stabilize near 2.60% by late 2026.
US Unemployment Rate %: Unemployment rate measures job seekers.
Analysts forecast this rate will hover between 4.2% and 4.4% through the end of 2026.
US 10-year yield: A proxy for mortgage rates and investor sentiment about the economy.
USAFacts Website: A not-for-profit, nonpartisan civic initiative making government data easy for all.