October 19, 2024

It seems to be a matter of faith among most pundits and analysts that tariffs are inflationary. The argument behind this conclusion is straightforward. Yet, under the assumption that the rest of the world retaliates , the price of imports and imports increases while the price of export and or exportable declines. Given the assumption that the retaliation is intended to offset the impact of the US tariff, one can then show that these two-price movements cancel each other out. The conclusion being that there is no impact on the US inflation rate. There is no basis for the argument that the tariff will increase the US inflation rate.

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