If the United States soon ends up imposing tariffs on all Chinese imports, the nation’s economic growth would be reduced by up to 0.2 percentage point by the end of 2019, while domestic core inflation would rise by 0.2-0.3 point, J.P. Morgan economists said on Friday.

The tariffs would trim the government’s budget gap to $900 billion from $1 trillion in fiscal 2019, they said in a research note.

The economic impact from duties on an estimated $544 billion worth of Chinese-made products could be greater “if business confidence suffers more than we expect,” they wrote, Reuters reported.

The Trump administration said it would implement tariffs on an additional $200 billion of Chinese imports on Sept. 24, starting at a 10 percent rate that would grow to 25 percent in 2019.

Beijing retaliated with a plan to impose tariffs on $60 billion worth of U.S.-made goods.

J.P. Morgan economists forecast U.S. consumers would pay $40 billion more on imports, which is equivalent to 0.2 percentage point of $20 trillion in gross domestic product.

They said the Federal Reserve will likely assess the effects from tariffs as transitory. If a bump-up in inflation were to materialize, Fed officials may raise their median forecast on the number of interest rate hikes in 2019 to four from their current average of three.

Meanwhile, the U.S. economy is expanding at a 3.6 percent annualized rate in the third quarter, the Atlanta Federal Reserve’s GDPNow forecast model showed on Friday, following the release of August data on domestic consumption and income.

This was slower than the 3.8 percent pace calculated by the regional Fed’s forecast program on Thursday.

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2018 is 3.6 percent on September 28, down from 3.8 percent on September 27. The nowcast of third-quarter real personal consumption expenditures growth decreased from 3.7 percent to 3.5 percent after Friday morning’s personal income and outlays report.

The next GDPNow update is Monday, October 1.

The Atlanta Fed issued the revision just hours after the government said consumer spending increased steadily in August, supporting expectations of solid economic growth in the third quarter, while a measure of underlying inflation remained at the Federal Reserve’s 2 percent target for a fourth straight month.

The Commerce Department said consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.3 percent last month after an unrevised 0.4 percent gain in July. Spending last month was driven by outlays on healthcare, which offset a drop in motor vehicle purchases.