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The Tariff & Price Spiral Will Take The U.S. Into Recession
Will this be the first time that a singular individual is responsible for an entire recession?
It’s become pretty clear that tariffs are hear to stay. Barring some miracle intervention (which seems like wishful thinking at this point), Donald Trump seems determined to prove that he’s right and the entire rest of the world is wrong about tariffs and their ultimate impact. Except that Trump is wrong.
As I wrote about previously, tariffs harm the economy and consumers by:
- Reducing the volume of global trade (and also reduce American exports because of retaliation).
- Raising prices of direct imports as well as manufactured goods that use imported components.
- Reducing choice and supply.
And unfortunately for everybody, the impacts to prices and inflation will show themselves faster than the negative impacts to economic growth. This means that the Federal Reserve will have no choice but to focus on controlling inflation over stimulating economic growth.
Remember, the stock market is not the economy. And while it’s often a signal of the expected future state of the economy, a declining stock market is not decisive enough for the Fed. They…
