Let’s investigate two studies. Can they both be right? 
The No Side
A San Francisco Fed study by Regis Barnichon and Aayush Singh discussed the No side in What Is a Tariff Shock? Insights from 150 years of Tariff Policy
In this paper we exploit 150 years of tariff policy in the US and abroad to estimate the short-run effects of tariff shocks on macro aggregates. A careful review of the major changes in US tariff policy since 1870 shows no systematic relation between the state of the cycle and the direction of the tariff changes, as partisan differences on the effects and desirability of tariffs led to opposite policy responses to similar economic conditions. Exploiting this quasi-random nature of tariff variations, we find that a tariff hike raises unemployment (lowers economic activity) and lowers inflation. Using only tariff changes driven by long-run considerations—a traditional narrative identification—gives similar results. We also obtain similar results if we restrict the sample to the modern post World War II period or if we use independent variation from other countries (France and the UK). These findings point towards tariff shocks acting through an aggregate demand channel.
The Yes Side
On November 17, 2025, the Tax Foundation discussed Trump Tariffs: Tracking the Economic Impact of the Trump Trade War
Historical evidence and recent studies show that tariffs are taxes that raise prices and reduce available quantities of goods and services for US businesses and consumers, resulting in lower income, reduced employment, and lower economic output.
Reduced Employment and Lower Growth
Both sides agree that tariffs reduce employment and lower growth.
I am on board with that. Hello Trump!
But let’s look further.
Lessons from the 2002 Bush Steel Tariffs
Please consider Lessons from the 2002 Bush Steel Tariffs by Erica York at the Tax Foundation.
In 2002, the George W. Bush administration placed tariffs on imports of certain steel products in an attempt to protect the domestic US steel industry from foreign dumping. The failure of these tariffs to work as designed and the economic harm they caused provide a foreboding tale of what we should expect to see result from the Trump Administration’s new tariffs on steel and aluminum. A research paper titled “The Unintended Consequences of US Steel Import Tariffs: A Quantification of the Impact During 2002” found that in 2002, more American workers lost their jobs due to higher steel prices than the total number employed by the US steel industry itself.
If this last round of steel tariffs has anything to teach us, it is that the long-term impact of tariffs are higher prices and smaller quantities for US businesses and consumers that result in lost business, reduced employment, and slower economic growth.
The vast majority of the manufacturers that use steel in their business processes are small businesses. Ninety-eight percent of the 193,000 US firms in steel-consuming sectors, at the time of the Bush steel tariffs, employed less than 500 workers, according to the above study. The economic implication of such small firm size meant that these businesses were “price takers.” In other words, the firms were too small to have the market power to influence prices and instead had to accept the higher input costs caused by tariffs.
The effects of higher steel prices, largely a result of the steel tariffs, led to a loss of nearly 200,000 jobs in the steel-consuming sector, a loss larger than the total employment of 187,500 in the steel-producing sector at the time. The study warns:
In making policy for the revitalization of manufacturing, including the steel industry, our conclusions suggest that the effects across the full industrial spectrum should be considered. The lessons of the impact of higher steel costs should counsel a good deal of caution when import barriers are considered.
The tariffs not only led to domestic pressure characterized by supply shortages and higher prices, but also international pressure. US steel market prices were generally higher than steel prices paid by competitors abroad. This gave foreign producers of steel-containing products a cost advantage over US producers of steel-containing products. In response, customers began shifting orders from US manufacturers to foreign manufacturers.
In total, the benefit of using protectionist policies to save very few steel-making jobs in the short run was significantly outweighed by the unintended consequences of higher prices and job losses in other industries. The outcome of the 2002 Bush steel tariffs is not unique, and we should expect to see similar effects from the new tariffs on steel and aluminum products under President Trump.
Zero Doubt
There is zero doubt that the reports by Erica York and the Tax Foundation are factually correct.
Let’s look at what’s happening now, at the grocery store, and how Trump is reacting.
Trump Admits Food Inflation!
Was it tariffs? Oh no, of course not.
The rising price of bananas and coffee, cannot be due to tariffs. Like Warren and Biden, Trump blames price gouging. The same applies to the price of beef.
Three Statements on Price Gouging
Please consider Three Statements on Price Gouging: Who Said What? Trump, Warren, or Biden?
I list three statements. Tell me who said them.
Who Said What?
A. “Actions must be taken immediately to protect Consumers, combat Illegal Monopolies, and ensure these Corporations are not criminally profiting at the expense of the American People.”
B. Meat packers are “corporate criminals” and Tyson Foods is abusing its “corporate market power and raking in record profits by jacking up meat prices.”
C. Meat packers are using “their position as middlemen to overcharge grocery stores and, ultimately, families.”
What Should We Make of the Biggest Trump Tariff TACO Yet?
On November 15, I asked What Should We Make of the Biggest Trump Tariff TACO Yet?
Trump is rolling back tariffs. I am laughing, not complaining.
Best Comments of the Day
- “It’s certainly a step in the right direction, but it’s important to recognize that the pain that American working families and businesses feel from tariffs goes way beyond coffee and bananas,” said Jake Colvin, president of the National Foreign Trade Council.
- “By admitting that lowering tariffs will lower prices for U.S. consumers, the Trump administration is acknowledging what economists have pointed out all along: tariffs raise prices,” said Erica York, vice president of federal tax policy at the Tax Foundation, a think tank critical of tariffs.
Worst Action of the Day
In their place, the administration has expanded other tariffs on individual industries like steel, aluminum and automobiles based on more established national security law—Section 232 of the Trade Expansion Act of 1962.
Steel and aluminum tariffs do far more damage than food tariffs. The latter mostly just raise prices. Steel and aluminum tariffs cost jobs and destroy small businesses unable to escape the tariffs.
There is no way to pay back all of the small businesses Trump put out of business with his hugely damaging steel and aluminum tariffs, and tariffs on parts used by those businesses.
I am laughing at banana stupidity, now reversed, and also at the stupidity of Trump’s rants. But his other tariffs are no laughing matter.
Primary Concern
If the primary concern is high prices, then according to Regis Barnichon and Aayush Singh, Trump should raise tariffs!
Q: How so?
A: Raise tariffs high enough to kill enough jobs to slow the economy and lower prices.
Apparently, we don’t need the Fed. We just need more tariffs.
Best Headline of the Day
I wish I thought of this one. The WSJ commented Yes, We Want No Banana Tariffs
President Trump insists his border taxes aren’t raising prices, but Treasury Secretary Scott Bessent more or less conceded otherwise on Wednesday when he floated exemptions for coffee and bananas. Is this the beginning of political wisdom?
Mr. Bessent teased tariff exemptions in a Fox News interview this week: “You’re going to see some substantial announcements over the next couple of days in terms of things we don’t grow here in the United States, coffee being one of them, bananas, other fruits, things like that.” White House economic adviser Kevin Hassett echoed Mr. Bessent.
What the Hell?
Again, if tariffs lower prices, why the hell is Trump not raising tariffs?
Shouldn’t we be in price Nirvana by now?
Trump says he does not want to talk about affordability because it’s great.
Excuse me, but if affordability was great, Trump would not shut up about it.
Instead, he sounds just like Biden.
Perverse Reasoning
I suppose, in a roundabout way, tariffs will eventually lower prices.
Q: How so?
A: Tariffs will first raise prices (as noted by the Tax Foundation), while killing jobs and slowing the economy (as both agree), thereby reducing demand which eventually lowering prices.
Q: Any other possibilities?
A: Yes, the Smoot Hawley Tariffs are great example. Demand destruction was immediate. Then, in an attempt to get prices up, FDR burnt crops and reduced supply, but also destroyed jobs and livelihoods. The result was the Great Depression.
So, if those are the ways you think tariffs reduce prices, then I am more or less on board.
Mish, Are You Changing Your Mind?
No, I have repeatedly discussed the perverse logic of the tariff price nay-sayers.
For example, please consider Long-Term Treasury Yields Rise Again, Gold Sinks. What’s Going On?
The question at hand is not about weakening jobs. And weakening jobs plus stubborn inflation looks like stagflation.
But how long? I think it will be stagflation-lite, not long-lasting (at least in the short-term and possibly mid-term).
Q: Why?
A: Demand destruction from collapsing jobs, an AI slowdown, and continued tariff-uncertainty will sooner or later weaken the inflation impulses.I expect sooner. Possibly, that’s why yields have not blasted higher already.
A recurring question of mine all year has been how quickly demand destruction due to lost jobs would offset price hikes due to tariffs.
I repeatedly stated “I do not know and no one else does either.” Part of the uncertainty is no one has any idea what Trump will do and when. I don’t know and you don’t either.
A recent series of Trump TACOs reversed huge portions of his March reciprocal tariff announcements.
That’s too bad.
Had Trump only kept those tariffs, the economy would collapsed sooner, killing more jobs faster. Then the price collapse would have been much faster than this slo-mo TACO torture reversal.
Fully On Board
I am fully on board with the unanimous vote of the Yes-position and the No-position that Trump is killing jobs and lowering growth with his tariffs.
I appreciate this support from both sides. Thank you.
Eventually, demand destruction due to the lost jobs and slower growth will bring about overall lower prices.
Then, whether or not one credits inane tariff policy with lowering prices is in the eyes of the beholders.
Meanwhile, there is no doubt tariffs have raised prices and that Trump is reacting to those higher prices by lowering tariffs.
But also credit Regis Barnichon and Aayush Singh. Since tariffs destroy jobs and slow growth, prices will eventually drop. This makes Trump’s TACO tariff reversal a major pity.
Trump needs to hike tariffs to kill the economy faster, destroying demand, and eventually reducing prices faster.
I’ll make a note.
But wouldn’t it have been a better idea to not hike tariffs raising prices and destroying jobs in the first?
Addendum
Here’s a comment from one of my readers, emphasis mine.
I do not know the firm or industry, but I asked. If I get an answer I will add to the addendum.
My firm has been researching the effects of tariffs on specific industry sectors for years. What Erica is reporting is exactly right, product consuming industries are particularly hard hit when the price of their supplies increases.
The negative effects are enhanced by two other factors. First, tariffs placed on major producing countries set a price floor on a product. This is similar to an excise tax on cigarettes, or rent control. The price floor allows domestic producers to increase their prices. Our research shows that generally domestic producers increase their prices by about 90 percent of the tariff rate. In fact, this is kind of what tariffs are supposed to do – make US manufacturers more profitable.
In addition, the costs can only be moderated if the tariffs lead to an increase in production of the product in the national market. In most cases this is simply not possible. Nobody is going to open an aluminum refinery in the US – electricity costs are way too high. Nobody is going to start producing Champagne in the US (Champagne ONLY comes from a specific area of France). Nobody is going to grow bananas in the US – in spite of purported “global warming.”
Its simple economics, its what David Ricardo and Adam Smith wrote about 250 years ago, and unfortunately most economists (and likely all politicians) know little about how microeconomics works.
My firm has been researching the effects of tariffs on specific industry sectors for years. What Erica is reporting is exactly right, product consuming industries are particularly hard hit when the price of their supplies increases.
The negative effects are enhanced by two other factors. First, tariffs placed on major producing countries set a price floor on a product. This is similar to an excise tax on cigarettes, or rent control. The price floor allows domestic producers to increase their prices. Our research shows that generally domestic producers increase their prices by about 90 percent of the tariff rate. In fact, this is kind of what tariffs are supposed to do – make US manufacturers more profitable.
In addition, the costs can only be moderated if the tariffs lead to an increase in production of the product in the national market. In most cases this is simply not possible. Nobody is going to open an aluminum refinery in the US – electricity costs are way too high. Nobody is going to start producing Champagne in the US (Champagne ONLY comes from a specific area of France). Nobody is going to grow bananas in the US – in spite of purported “global warming.”
Its simple economics, its what David Ricardo and Adam Smith wrote about 250 years ago, and unfortunately most economists (and likely all politicians) know little about how microeconomics works.
We may not grow bananas, but we go bananas with presidents like Trump.
Interesting. Thanks. They also do help in protecting some industries that are probably essential? I notice the Cattle industry is not happy with Trump lowering or removing the beef tariffs to help drop prices. They said exactly what you said, it gives a floor to operate with and makes the local industry more stable.
Don’t confuse trademark names for not producing a product.
The US (and other countries) produce plenty of Champagne domestically. It’s just called sparkling wine everywhere else in the same way lots of countries produce Scotch, only it’s called Whiskey.
Also we grow Banana’s here in Florida (I have some on my property).
Thanks John – can you name your firm?
John Dunham & Associates
Thanks for your account of your real-world experience.
BUT your last point is pretty far awry. Almost every Principles of Microeconomics textbook I’ve ever seen theorizes EXACTLY what you describe. Increase a tax (tariff)/price on an input and the quantity of the output (that uses that input) will decrease and the price of the output will increase. How much so depends upon the price elasticities of supply and demand of the output.
But economists certainly know this; look at how many (non-partisans) have disagreed with Trump’s prediction of tariff impacts
I agree with you. Problem is the the vast majority of economists today are “practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”
Very few understand the Classical School of economics which is where all of the micro stuff comes from. Without a solid understanding of how business actually works, they can make some pretty large leaps of faith.
“The price floor allows domestic producers to increase their prices. Our research shows that generally domestic producers increase their prices by about 90 percent of the tariff rate.”
Perfectly said. Being in global commercial banking (treasury, not the wealthy ritzy investment guys), this is absolutely true.
The real question is whether the tariffs will propel re-industrialization, not whether they increase “inflation”. [Inflation here is understood as higher prices, like the letter I just received about my subscription, claiming they needed to raise prices because of inflation. Ha ha. We need to raise prices because prices are being raised.] It should be obvious that tariffs are not inflationary (in the sense of injecting more credit/money), as the tariffs are remitted to the treasury and are thus fiscally neutral. Of course price impacts will be differentiated, and since the government is overruling private parties trading to their own advantage, will be deleterious to economic activity.
Trump’s “reciprocal” tariffs are in no way reciprocal, in fact they are not even based on an attempt to express the average weighted tariffs in trade partner countries. If they did, the whole effort would be shown to be preposterous.
But this underscores a larger issue. The idea that you should be targeting countries as a whole is wrong-headed (rooted in false notions about dumping, taking advantage, unfair trade, etc). You should be targeting specific manufacturing sectors in which your country has a chance of nurturing beneficial production. Obviously targeting bananas, coffee, or metals which cannot be produced domestically are simply excise taxes.
Nurturing growth sectors requires much more finesse, and requires a long-term plan with slews of support measures (schooling, tax breaks, space, infrastructure, industrial policy, strategy). Of course this can only yield results if you have done previous leg work on the business case for such activities.
On that there is little question. They won’t.
But instead, presume they do. Then when and at what cost?
Assuming I am wrong in a big way on “they won’t” I am happy to discuss the cost.
The cost is big inflation and falling exports as the US become the high cost producer.
Price increases until demand destruction due to higher prices? This is usually the case unless the government and Fed flood the economy with cheap or free money.
244 PM EST … HR 4405.. 427 to 1 …
… Thank you and appreciation and congratulations to congressional representatives Massie, Mace, Greene and Boebert … you have really saved the American Republic…. the inception of the institutionalized lame duck presidency has officially begun … In the Big Picture, tariffs do increase prices .. except in the specific condition of global debt-default and global-asset-price-collapse under the sub conditions of serious economic recessions and depressions….
Somebody’s paying it. Consumer higher prices , business, importer, producer : lowering profit . So its a tax somewhere
Breaking News: Federal court blocks Texas re-districting plan for midterms.
https://www.nbcnews.com/politics/elections/federal-court-blocks-texas-redrawn-congressional-map-rcna244673
ROFLMAO!
Now California will have new seats virtually guaranteeing a democrat controlled House after midterms.
ROFLMAO!
Again, nothing but shotgun posts from you.
A. This is not the final word
B. How are you so certain the Republican challenge to the CA law won’t suffer the same fate?
A. Possibly
B. Because California followed the law.
I think in California they are all Carter, Obama, and Biden judges. They ruled the law, so the DOJ stands a chance.
The problem as i see it.
Business always seeks the lowest wages and material cost. We were lucky to come out of ww2 as the only manufacturing economy not destroyed during the war. Combined with double the labor force ie women and a large number of new products people wanted. Ie refridge/ washer /dryer /cars etc combined with a boom in population. (Housing) It set us on the path to higher living standards. The ones the republicans want to take us back to. The 50s But that was a fleeting time.
Now there is competition.
In a nutshell world wages will rise and our wages will fall to there is some sort of equality.
You can put tariff on things but will make the cost of living more expensive. Then employers are gonna have to pay more for employees. Making it still cheaper to buy the tariffed product.
Go down the fb wormhole of reels. Find all the vids from india where the guys are working steel bare foot or in tennis shoes.
Who is signing the check for the studies?
Yes they do, but as the NATO chief explained, they are currently being used as a geopolitical card. He specifically mentioned “increasing the tariffs on India if it keeps selling weapons to Russia” etc. etc.
The “economic war” is, I think, the smallest part of it. Because regulations could have achieved a sharp reduction in imports anyway (most imported Chinese electrical and building products are not up to code for the US and Europe).
Tariffs raise prices until they crush demand. The demand crush is conveniently being ignored by all the Freidman-esque supply siders in claiming a great victory against tariff premiums.
One example (of many) is digital camera and lens prices have gone up due to tariffs.
It has affected the used market as well since Japanese sellers were big players in the US market and now all used camera equipment from Japan requires a customs charge.
The U.S. can be more creative than selling its birthright for a mess of pottage (becoming a financial hostage to the Pacific Rim), indeed, its Western plantation (“the capital account reflects net change in ownership of national assets”).
To be effectively competitive in foreign markets, requires that we sell lower unit costs and higher quality products. This means concentrating on production, innovation, and product quality. It means giving workers a financial stake in increased productivity (share in profits, etc.).
Tarriffs are deflationary. Every time I buy something without a tarriff, my prices come down. The only time I buy a tarriffed item is by necessity and only when price is reduced to cover tarriff cost. I never pay full price when I do finally gladly pay a tarriff. I see increased entrepreneurship as people get creative to replace their unproductive paper pushing job that just got eliminated. Entrepreneurial efforts are on the rise out of necessity, and small businesses are actually producing something rather than just flipping items. It is an emerging Golden Age that reward producers, and pinches salesmen.
$99 is less than $100. Tariffs are comparable to sales tax. Sell a $10 item and sell 10 units = $100. Add 10% sales tax and sell it for $11 but only sell 9 units = $99. Boom Deflation. The problem is we are all fed the Keynesian propaganda. Added taxes and regulations create deflation and great productivity creates inflation. The problem is we look at units and not the unintended consequences that affect the whole system.
Yes, but if the price goes up to the extent that only one person can afford it, the people in the street call that inflation, ie higher prices.
Transnational oligarchs outsourced jobs starting decades ago. But they don’t want their customers — you — outsourcing their profits.
These people — IMO traitors with no loyalty to the USA constitution — have the gall to describe their concern as “national security” when in fact the Epstein case and multi-decade coverups prove they want “national in-security”.
When Chinese companies started building retail brands, that’s when the oligarchs decided to “pivot to [threaten] China”. If only China agreed not to sell directly to Oceania serfs, Oceania oligarchs would continue business as usual.
just border taxes. stupid. Trump/Smoot/Hawley/Epstein 2028
West coast port shipping has fallen off the cliff. The Trump recession is here, 100% owned and operated by Trump/GOP. 100%
https://www.youtube.com/watch?v=ln2-fcDSa_E
“West coast port shipping has fallen off the cliff.”
This is good news, Tariffs are working.
Ask the GDP how it feels in a few months
Trump will just have Israel bomb the democrats.
If the tariffs were working the IRS would be closed and the ports would be brimful of American-made goods ready to ship to the defeated and humiliated felons of the globe who were “stealing” from us.
If the authors had proposed a short term bump in inflation, followed by an unwinding a disinflation later, I could have believed it. As it stands, it contradicts evidence from other forms of taxation (sales taxes, VATs, etc.). When the sign of an equation is reversed from what theory and praxis would suggest, that’s when I start looking for the likely missing variable. In this case, my guess would be that it’s the impacts of other kinds of taxes on goods. The regression itself seems to be too limited to account for any number of other confounding variables. I’m not sure the analysis is really even possible in the format they used. The sample set is too small to begin listing all the relevant inputs.
Yes, that has been my position.
So many people bombarded me with that article telling me I was wrong.
Motivated reasoning. Lots of people have an emotional interest in the article being correct (as much as I do in it being incorrect). As you point out, the recent reversal on some of the tariffs would be evidence that there’s something amiss.
Perhaps it’s confusing because you’re using different language than these academic researchers. Inflation is NOT the same as a few specific prices going up.
It’s well recognized that specific product prices can go up (one-time) from tariffs (no matter what Trump says):
https://www.stlouisfed.org/on-the-economy/2025/oct/how-tariffs-are-affecting-prices-2025
But inflation (by definition) is an amalgamation of ALL prices consumers face. So tariffed goods can definitely increase in specific price while other (non-tariffed) goods can simultaneously go down (potentially) in price if the tariff shock is large enough to reduce employment/spending so much that consumption (and maybe prices) of general goods can decrease.
So it’s theoretically possible to have some prices increase (from tariffs) while inflation could go down overall. Thus the need for empirical studies
Meanwhile on another planet, a government with more STEM representatives accepts the idea of prices dropping.
https://kdwalmsley.substack.com/p/top-china-execs-forecast-more-deflation
Can you imagine living somewhere where things become more affordable instead of less? I used to live in such a place. Or time.
You know, folks, a “technocracy” might be alright, when it’s not run by lawyers and lobbyists working for an entrenched transnational oligarchy. … Good luck to China in limiting the concentration of wealth before they end up the same way, like this:
https://kdwalmsley.substack.com/p/long-before-china-starved-the-pentagon
I believe a properly deployed tariff strategy is good policy for ensuring the US increases domestic production of strategic goods. That should be the goal. However, this isn’t a 4-year process, so Trump needs to make the case to businesses, consumers & Dems to ensure the goal is follow-ed through across administrations.
In addition, Trump’s tariff policy has not to my knowledge effectively communicated which strategic goods America must increase production. Obviously, REM, pharma & steel / AL / CO are good examples. But there needs to be a clear message of what is being targeted, why & who the primarily exporters are.
I read about the study reported by the WSJ on Breitbart yesterday, and like anyone I find its conclusion about tariffs raising unemployment which eventually lowers inflation as being terrible justification for tariffs. Also, 50% tariffs on steel / AL / CO are just stupid.
A much better starting point would have been a 10% tariff on everything that comes into the country with no exceptions. Then tell everyone this 10% will be used to reduce the deficit, because 10% is something that, in general, is easily absorbed by foreign producers, exporters & importers. Then lay out the case for what’s coming in from China & elsewhere that’s strategic, take appropriate measures to add additional tariffs as needed & to provide domestic price support for those strategic goods you’re targeting.
America will be much better off if we remove our dependence on China for those things that they can cut off at a moment’s notice for any reason they decide to do so.
How can anyone claim that increasing the cost of producing and selling some thing, any thing, would not eventually increase that thing’s price.
Perhaps the producer would prefer to deprive his/her family instead of a customer?
I do not believe agape is exactly flourishing in Capitalism.
Then there is the legal fiduciary responsibility to shareholders to consider.
Imports are filled with middle men who each take a cut. Each cut is like a privatized tariff which is called by it’s euphemistic name of profit. Now don’t get me wrong, there is nothing wrong with profit for people who add value. It is not actually profit which is just a economics discipline monetary word. It is really just value added. Linguistics has done much to gaslight people into thinking that everything is as it should be, when the actual gut feeling is that there is something wrong. Your imported hundred dollar sneakers that cost ten dollars to produce are the real problem. No value was added between the producer and consumer to warrant the high price. Tariffs are deflationary by nature because they will encourage local production by Americans who won’t take any Sh..t
American labor will insist on higher wages. The $100, sneakers may well be the cost to produce.
If you want REAL-TIME proof of what tariffs are doing you need look no further than Home Depot’s fiscal quarterly report. Home Depot stock down 5% this morning.
https://www.cnbc.com/2025/11/18/home-depot-hd-q3-2025-earnings-.html
Trumper clowns can claim tariffs don’t cause inflation or problems but that’s not reality. Case closed, midterms opening, the voting jury electorate will decide.
Even more signs that Tariffs are working. Unproductive shareholders are loosing their cut, and it is being transferred to Coffers that could benefit Americans. Not that I have faith in Governance, but I hardly have any faith in Wall Street that off shored jobs to begin with, and de industrialized America. When we weren’t paying for it, we were just just paid off, even hushed by lower priced imports. and ignored the social fallout and economic decay it produced. Now that we are all paying for it we can expect Governance to put American People First. Productive Americans now have a solid price floor on which to invest and produce. How about a thumbs up from everyone out their who is a productive individual that actually creates something, and a thumbs down from those who have not produced diddly squat.
“Unproductive shareholders”
How are shareholders unproductive? Shareholders don’t do anything but invest their capital into businesses for a return. Not sure how things work in your communist Cuba but that’s not how things work here.
And how did Wall Street “offshore” jobs? Every business wants to optimize their costs and if having someone in China or India or Mexico makes a cheaper widget than you do then the problem isn’t offshore, it’s YOU.
Your whole comment reeks of “entitlement” and that’s why you’re in the circumstances you’re in: angry, bitter, and lost. You keep waiting for someone to save you and it’s not going to happen. Not with Trump nor anyone that follows. Have a plan or your quality of life will simply degrade.
You sound like you were not around during the 60’s and 70’s when consumer goods were made by Americans, and the middle class was stronger. IPOs raise money for startups, but remember corporations that conduct a dilutive secondary offering can generate more capital for growth, but this also increases the total number of shares and can decrease the value of existing shares, so this is not a common practice.
Most shares just get flipped over and over again without producing a thing. Many shares were created 50 years ago, and have been traded like baseball cards ever since. IPO’s can be an investment, but the market in general is more like speculation.
“Most shares just get flipped over and over again without producing a thing. Many shares were created 50 years ago”
Wrong, shares flipping over and over return profits (or losses) for investors.
And most companies, at least the profitable ones, came after 2000. Most companies don’t last 50 years.
The HD stockholders should sue Trump on his D&O policy.
Prior to paying an income tax in the early 1900’s, the federal government derived its income from import taxes. The chart in the article shows a huge import tax rate. I would expect prices to increase due to tariffs as long as the income tax rate is not brought down.
A tariff based federal income was long term beneficial to the US because it encouraged developing the knowledge and processes to build things at home, and it held prevented dependencies on other countries goods. The industrial revolution brought deflationary price pressures through economies of scale that more than offset the tax. The US developed a trade surplus. The timing of applying tariffs and historical conditions were critical in the apparent success of tariffs to the US economy.
Reverting from income tax to a tariff based source of federal income is made difficult because net taxes are increasing, the costs to build new factories are huge, and few are willing to engage in delayed gratification imported trinkets bring.
Except, during that period the United States was heavily dependent on manufactured goods from foreign countries. We ran persistent trade deficits, which – thanks to brainiac Trump – we all know now are like being on the wrong end of a profit and loss statement.
“Prior to paying an income tax in the early 1900’s”
Prior to the 1900’s we didn’t have 76m people on social programs asking for handouts. That number is growing exponentially at a time the population is shrinking and the current administration is hostile toward immigration.
Back in the 1900s, the population was young, having lots of kids, and the borders were open. Ironic huh?
That and the fact that 90% of people lived on a farm and were self sufficient food / clothes / shelter wise. So they didn’t need many goods and services much less imported ones.
Self-sufficient because they had to be.
They were poor, by today’s standards.
The farmers in my family tree were very well off, owned lots of slaves, and they sent their extra sons west in pursuit of cheap land and fortune.
They were not fully self-sufficient. They were highly reliant on imported goods.
Which goods were imported in the 1800s that they were highly reliant on?
Axes, saws, farm implements, firearms, metal parts of all sorts, etc. Initially almost everything. For instance, almost all locomotives in North America initially came from Europe. US manufacturers were able to penetrate that market because the size and weight, so US manufactures were able to quickly capture that industry. But by the time of the Civil War, both side were heavily dependent on foreign-made weaponry. And even military uniforms. My Great Grandfathers got rich importing British cattle. They sold purebred Shorthorn bulls and cows all over the US west of the Mississippi.
Humans from Africa
Back in the 1900s, the USA was under Jim Crow and females could not vote. Progress isn’t 100% linear and in lock step.
Sometimes progress has a reverse gear.
*Hostile towards Illegal Immigration.
Prior to 1900 ALL countries relied heavily on tariffs as a source of revenue. The Federal government was small and did not have the technical capacity to collect taxes from the states or the people. The one thing the Federal government actually controlled at that time was the border and the ports of entry.
This is the same reason that less developed countries rely on tariffs today. Revenuers in Zaire cant travel down the Congo River to the mines to collect revenue but they can control the seaports and collect import (as well as export) tariffs.
It is always best to collect a tax as far down the supply chain as possible (like a retail sales tax or a gross receipts tax). This reduces the impact on the consumer and the impact on demand.
Given the choice between tariffs and almost anything else, you want to tax using anything else
Others have commented on factors I did not identify. What it shows is the issue of tariffs is highly complex and both the pro and con arguments presented in the article are superficial. Both breadth and depth of research are necessary to form policy.
I think Mish’s hunch on why regressing inflation on tariffs can yield a negative coefficient is correct. If tariffs drive up unemployment (as the SF Fed authors find), and higher unemployment lowers inflation (as most people find), the net impact of a tariff increase on inflation is likely negative. Reason: If unemployment and inflation are determined simultaneously, you can’t regress inflation on tariffs and claim the coefficient measures the impact of tariffs on inflation. You are also capturing the impact of unemployment on inflation. That tariffs are exogenous to the cycle is irrelevant. I thought they still teach this coefficient identification stuff… but apparently not.
Looks like you didn’t read any of the article Mish referenced.
Third paragraph:
“Identifying the causal effects of tariff changes from time series variation requires isolating exogenous variations in tariffs, that is tariff changes which were not systematically taken in response to the state of the business cycle or the level of inflation.”
Fifth paragraph:
“To address any possible remaining endogeneity concerns, we also use an IV approach where we build on our narrative study to isolate dates with large tariff changes that were explicitly motivated by long-run considerations (and not in reaction to the state of the cycle). Regardless of our identification approach, we obtain the same result: a tariff hike lowers CPI inflation and raises unemployment.”
They are looking at both exogenous and endogenous factors – and identifying/controlling for them – which are typical econometric tools. And the reason why empirical research generally is better than the “I think …” approach.
Thanks. But I still think you need a structural model to identify the direct impact of tariffs on inflation. The VAR isn’t a good strategy if there are only a few observations. But let’s see what the econometrics people say.
If the inflation impact occurs through an aggregate demand shock (as the article purports) and NOT through “the direct impact of tariffs”, then such a structural model would not exist and could not be estimated
Why would a cost increase paid by importers on impact primarily decrease aggregate demand and leave aggregate supply unaffected?
No one said aggregate supply would be unaffected. Theoretically, IF a large percentage of the economy was severely and specifically impacted by tariffs, then we could have a short-term negative aggregate supply shift. I think this is what Mish believes, as he references a stagflation-lite economy.
But this article Mish references specifically cites a negative aggregate demand shock from a new and sudden tariff regime that potentially causes a loss of confidence by consumers and/or investors; and also possibly a negative wealth effect from drops in asset prices.
This should be empirically tested (as the article suggests). But this could coincide with stock market drops accompanying Trump’s tariff announcements, farms and farmland losing markets and value due to retaliatory tariffs, small and medium businesses closing due to expensive tariffed inputs, lower port and shipping business due to lower imports and exports, etc.
All of these examples have been discussed on this blog since Trump’s imposition of tariffs
O.K. What you are saying is that tariffs could be so damaging to growth and unemployment (via aggregate demand effects) that this would overpower the direct tariff impact boosting inflation. If that is true, tariffs would be an even worse idea than I ever suspected. At the same time, I don’t think anybody has ever said that tariffs are that bad.
Some/a lot of research says the Smoot-Hawley tariffs of 1930 worsened the Great Depression by a significant factor. That’s ‘bad’.
And some compare Trump’s tariff increases to the Smoot-Hawley tariff structure: https://fortune.com/2025/04/03/smoot-hawley-act-tariffs-great-depression-trump/
But you can decide for yourself
Thanks for the link. I can see that tariffs might eventually lower prices by driving the economy into a 1930s type ditch. But it’s hard to believe that tariffs are so bad that inflation would drop on impact as the VARs suggest.
You forgot the hugest thing, the Department of External Revenue is going to replace the Internal Revenue Service.
Yeah, when pigs fly. Lol
It s possible. The size of the government need to be reduced to 5% of Gdp (the maximum historical share of revenues brought by Tarrifs). This means among other thing having an army of no more than 100,000 peoples.