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Liz Ann Sonders and Diane Swonk identify tariffs and AI investment as primary drivers of persistent U.S. inflation

Wall Street strategists Liz Ann Sonders and Diane Swonk have identified the trade war and the artificial intelligence capital spending boom as the two primary forces keeping U.S. inflation stubbornly elevated. According to Sonders, tariffs act as taxes paid by American importing companies, which can either absorb costs or push them into shelf prices, directly impacting inflation and growth. Swonk noted that while the initial tariff shock has largely played out, the current challenge for the Federal Reserve is underlying service-sector inflation, including healthcare and childcare costs. Both experts agree that the AI buildout is currently acting as a near-term counterweight to long-term productivity gains. While AI is expected to be a disinflationary force in the future, the current heavy demand for hardware and chips is driving up consumer electronics prices at a record pace. The Federal Reserve Bank of Minneapolis also confirmed that tariffs and AI-driven demand are both contributing significantly to core PCE inflation. The administration's data suggests that without tariffs, core PCE inflation would still be approximately 1 percentage point above the Fed's 2 percent target.

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