The Bank for International Settlements (BIS) has issued a warning that former U.S. President Donald Trump's trade policies, particularly his tariffs, could reignite inflationary pressures in the U.S. economy.

These tariffs pose a significant inflation risk, comparable to the supply chain disruptions experienced during the COVID-19 pandemic, according to the BIS.

In Australia, while the economy showed growth in the March quarter, there are signs that rising American tariffs are starting to negatively impact local businesses.

A survey by MYOB revealed that 17% of Australian small and mid-sized businesses have already felt the effects of Trump's tariffs, with many anticipating increased business costs and inflation.

Despite a lower-than-expected deficit forecast by Treasurer Jim Chalmers, the Australian federal budget does not account for the potential impacts of these tariffs, with state and territory debt projected to rise significantly.

S&P Global estimates that state and territory gross debt in Australia could reach $900 billion by 2029, with Victoria expected to have the highest levels.

The BIS report highlights concerns about slowing economic growth potential, threats to price stability, and high levels of public debt, complicating the economic landscape.

Deputy General Manager Andrea Maechler cautioned that current price surges may not be temporary, suggesting a more significant inflation trend.

Carstens expressed concerns that the U.S. Federal Reserve, under Chair Jerome Powell, may struggle to manage inflationary pressures and economic slowdown amid political pressure for lower interest rates.

In its annual report, BIS General Manager Agustin Carstens noted that Trump's tariffs caused economic disruption and increased uncertainty during their enforcement.

Carstens also pointed out that, despite a temporary stabilization during a 90-day suspension of tariffs, the global economy remains vulnerable to various challenges, including climate change and geopolitical tensions.

The BIS warns that the global economy may face a downturn as economic fragmentation and protectionism escalate, potentially leading to a resurgence of inflationary pressures similar to those witnessed post-pandemic.