Cato Daily Podcast
Don’t Ask the Fed to Fix Bad Trade Policy
Apr 7, 2025
Jai Kedia, a research fellow at the Cato Institute specializing in economic policy and trade, dives deep into the ramifications of the recent tariff regime imposed by the President. He explains how these tariffs strain the Federal Reserve's attempts to control inflation, highlighting the risks of stagflation. Kedia argues that the effects of tariffs are far from temporary, leading to fewer consumer choices and higher prices. He also critiques the notion that inflation is solely a monetary issue, revealing the complex interplay between tariffs and market health.
10:05
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Quick takeaways
- The introduction of tariffs is expected to raise consumer prices and create a negative supply shock, complicating the economic landscape.
- Critics argue that attributing inflation solely to monetary policy ignores the role of tariffs in reducing available goods and increasing competition.
Deep dives
The Impact of Tariffs on Inflation and Economic Health
The introduction of new tariffs is expected to increase prices for American consumers while simultaneously reducing the availability of goods, creating a negative supply shock. As tariffs lead to higher costs of imports, domestic industries may face pressures that further escalate prices, contributing to inflation. The Fed's ability to mitigate this inflation is limited, especially since it has already been contending with inflationary pressures for years. This situation could create a complex economic landscape reminiscent of stagflation, where both inflation and unemployment rise, complicating the Fed's monetary policy decisions.
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