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(Bloomberg) -- The White House’s chief economist dismissed the idea that tariff increases will have a lasting impact on US inflation, and cited the potential for interest rates to get back down to pre-Covid levels.

“Imports are only 14% of the economy — the ability of those types of things to move the needle on inflation are limited,” Stephen Miran, chair of the Council of Economic Advisers, said in an interview on Bloomberg Television’s Surveillance. “We have been introducing tariffs since day-one of this administration. And what we have seen is tariffs have started to come up” yet there’s “been no real meaningful effect on inflation.”

Miran highlighted that the past three consumer price index releases all showed smaller increases than expected. The core gauge, which excludes food and inflation, was up 2.8% in April from the previous year, holding at the slowest pace since the breakout of inflation in the spring of 2021.

Despite the moderation in price gains indicated by recent reports, Federal Reserve policymakers have held off on resuming interest-rate cuts. Officials have cited the potential for President Donald Trump’s tariff increases to push up inflation. Chair Jerome Powell said earlier this month that while the effects “could be short lived,” it’s also possible the impact could be more persistent.

Miran, who previously worked as a senior strategist at hedge fund Hudson Bay Capital, said that American importers “have flexibility,” with the potential to make products domestically or buy them from “other countries that treat us better.” That gives them leverage, he said.

Volatility Possible

“In the short run, can there be volatility in prices and economic activity, just as there were in financial markets? Yeah, it can happen,” he said. “But over time, we have the leverage — and that’ll allow us to force the burden of the tariffs onto other countries.”

As inflation pressures dating from the Biden administration’s “reckless” spending diminish, that will “provide scope for interest rates to come down,” Miran said.

“We’re going to bring interest rates down through expanding the supply side of the economy,” through policies including deregulation and Republican’s tax package, Miran said. “We get interest rates back to where they were pre-Covid, that’s another point off the deficit,” he said, referring to the budget deficit to GDP ratio — which has run in excess of 6% in recent years.

Rates remain well above pre-pandemic levels for now. Five-year Treasury yields are currently around 4.08%, compared with an average of 1.89% over the half-decade through 2019.

--With assistance from Annmarie Hordern, Lisa Abramowicz and Jonathan Ferro.