Trump tariffs likely to lead to higher U.S. interest rates, head of Institute of International Finance says

Extreme tariffs proposed by U.S. presidential candidate Donald Trump would interrupt the path of disinflation and could lead to higher interest rates, according to the head of the Institute of International Finance.

"The assumption is you'll have higher inflation, higher interest rates than you would have in the absence of those tariffs," Tim Adams, president and CEO of the IIF financial services industry trade group, told CNBC's Karen Tso on Tuesday.

"You can argue, is it one off, or is it over time? It really depends on what retaliation looks like, and is it iterative over time. But no doubt it would be a break on the progress we're making bringing down prices," Adams said.

Trump has made universal tariffs a core part of his economic pitch to voters, with suggestions of a 20% tariff on all goods from all countries and a higher 60% rate on Chinese imports. He has also pledged to put a 100% tariff on every car coming across the Mexican border, and to slap any country which acts to "leave the U.S. dollar" with a 100% tariff.

In defense of the plan, Trump told Bloomberg Editor in Chief John Micklethwait in an interview earlier this month: "The higher the tariff, the more likely it is that the company will come into the United States and build a factory in the United States, so it doesn't have to pay the tariff."

Trump has previously described universal tariffs as drawing a "ring around the country," and denied they would be inflationary.

However, analysts have warned that the overall package proposed by Trump, including higher tariffs and curbs on immigration, would place upward pressure on inflation, even if some of the impact could be absorbed in the near-term.

U.S. inflation came in at 2.4% in September, down from a peak of 9%