Did We Just See Peak Tariffs?

In the wake of Mamdani’s election, a media frenzy about “affordability” has goaded Trump into eliminating tariffs on some imported foods. This is an implicit admission that tariffs are inflationary. We believe, and a new San Francisco Fed paper confirms, that tariffs have historically not been inflationary, but contractionary. So it is positive to see Trump back off. “Affordability,” not trade, is what elected Trump. To achieve “affordability” prices must not just inflate at a low rate, they must fall. Gasoline and egg prices have. But electricity and natural gas prices have risen sharply since Trump took office, and medical services prices have accelerated. Wage growth has barely kept up, and it has improved significantly under Trump. That’s the key now – and for real wages to grow, the economy will have to grow. Eliminating tariffs is a way to get there, and SCOTUS will help by striking down the IEEPA tariffs. In the current “affordability” frenzy, Trump may secretly thank SCOTUS and not try to replace the tariffs by other means.