Unhedged

How inflationary are tariffs, really?

24 snips
Nov 26, 2024
Chris Giles, the FT's economics commentator and author of the Central Bank's newsletter, joins the conversation about the impact of recently imposed tariffs by President-elect Trump. They scrutinize whether these tariffs will genuinely drive inflation or merely adjust prices. The discussion also dives into the historical influence of tariffs on washing machine prices and examines market reactions to new political appointments. Additionally, they reflect on the cultural significance of London's Smithfield meat market and its uncertain future.
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INSIGHT

Tariffs and Inflation

  • Tariffs act as a tax on imported goods, directly impacting their prices.
  • This price increase can contribute to short-term inflation and potentially influence wages and overall price levels.
INSIGHT

US Economy's Relative Closedness

  • The US has a relatively closed economy, meaning a smaller portion of its economic activity involves international trade.
  • This lessens the potential impact of tariffs compared to countries with more open economies like Germany.
ANECDOTE

The Washing Machine Example

  • In 2018, Trump imposed tariffs on washing machines, leading to a noticeable price increase relative to other appliances.
  • This price difference decreased in 2019, rose again during the pandemic, and eventually fell after the tariffs expired in 2023.
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