Economists are growing concerned that US President Donald Trump’s tariffs could destabilize the US economy. As tariff-driven costs begin filtering through corporate supply chains, hitting retail shelves and fueling inflation expectations, tensions are mounting. However, Morgan Stanley analysts are urging markets to keep calm. In a recent research note, they argue that the current price surge is likely to provide only a one-time boost to inflation rather than a long-lasting structural lift.

According to the bank, current inflation expectations align with short-term price adjustments following tariff implementation, without significantly altering the long-term inflation trajectory.

A recent increase in 5- to 10-year inflation expectations has sparked debate over whether these levels will remain elevated. However, Morgan Stanley is skeptical that this trend will continue. Long-run inflation expectations not only remain anchored but are still low, consistent with 2% inflation and levels seen in the late 2000s, the bank said. 

Analysts point to a jump in short-term inflation expectations since February 2025 as clear evidence of the tariffs' initial impact. While Morgan Stanley's research confirms a notable increase in year-ahead expectations, it anticipates that longer-term metrics will remain "well behaved."

Still, the bank acknowledges that the risk of a more persistent tariff shock could emerge if it were to unanchor long-run inflation expectations. This could happen in case of a change in price-setting behavior among firms and wage demands among workers.

For now, though, the impact remains limited. In the near term, tariffs may push prices higher, but the effect appears transitory. That said, Morgan Stanley does not rule out the possibility of a more sustained inflation acceleration further down the line.