In recent days, it has become increasingly clear that the U.S. administration is starting to recognize the negative consequences of its own tariff and inflation policies. On Thursday, markets focused heavily on U.S. inflation expectations, which suggest that price dynamics could slow sharply next year. A day later, the White House announced another initiative aimed at easing the economic impact of tariffs, expanding the list of agricultural products exempt from reciprocal duties. The list includes mostly essential food products.
According to the administration, the decision stems from the fact that these goods are not produced in sufficient quantities in the U.S. to meet domestic demand, and the goal is to reduce price pressure on consumers.
However, many major food-exporting countries — including Brazil, one of the world’s largest agricultural producers — continue to face high tariffs of around 40%, meaning the tariff relief remains limited. Moreover, administration officials had been insisting for months that tariffs do not affect price levels, while the latest decisions explicitly assume that lowering tariffs will help reduce food prices. This marks a clear shift in narrative and an indirect admission that protectionist policy has contributed to rising living costs.
In reality, the policy shift is largely political — aimed at shielding consumers from the consequences of earlier tariff decisions. Food affordability and availability were among the most prominent issues in the recent local elections, prompting the administration to react in a way that may ease social pressure and improve political standing.
If tariff reductions do indeed help cool inflation, they could pave the way for further interest-rate cuts by the Federal Reserve. In recent weeks, markets leaned toward expectations that no rate cut would occur in December, but shifting inflation expectations may once again increase the likelihood of monetary easing.
This adjustment in interest-rate expectations may be one of the reasons behind the U.S. dollar’s persistent strength. Market participants remain cautious, but the dollar has stayed resilient even as bond yields and inflationary pressure begin to normalize. The key test for the currency will be upcoming U.S. macroeconomic data — if it confirms easing price dynamics alongside moderate economic growth, markets may again start pricing a higher probability of rate cuts in the first half of 2026.
Source: CEO.com.pl
