Democrats and their media allies have been claiming – indeed shouting from the rooftops – that President Trump’s tariffs would drive up inflation and wreck the economy. As our friend Robert Romano of Americans for Limited government documented:
On March 2, Senate Minority Leader Chuck Schumer (D-N.Y.) boldly predicted, “President Trump’s tariffs are going to raise prices on families by as much as $1,200 per year.”
On March 11, just yesterday, Schumer declared, “inflation has gone up under Donald Trump, from groceries to retail to cars.” (See below: Both groceries and cars didn’t experience any price increases in February, the first full month of Trump’s presidency.)
On Feb. 1, House Minority Leader Hakeem Jeffries (D-N.Y.) similarly suggested that prices would go up, stating, “The tariffs imposed by the administration and strongly supported by House Republicans will not lower the high cost of living for everyday Americans. Instead, it will likely do the exact opposite and make life more expensive.”
On March 3, Sen. Elizabeth Warren (D-Mass.) also projected price hikes, saying, “Donald Trump promised on ‘Day 1’ to lower costs, but instead working families now have to worry about giant corporations using his haphazard tariff announcements as an excuse to raise prices – and the Trump Administration has no plan to stop it.”
None of it was true. In February, consumer inflation dropped from 3 percent annualized in January to 2.8 percent, according to the latest data by the Bureau of Labor Statistics.
Commodities prices and interest rates collapsed across the board following President Donald Trump’s April 2 announcement of reciprocal tariffs on U.S. trade partners despite Congressional Democrats’ predictions that inflation would increase as a result of the tariffs. Here are the numbers as documented by Robert Romano:
Crude oil went from $72.22 prior to the announcement down to $66.12 per barrel as of this writing, an 8.4 percent decrease.
Hot rolled coil steel’s June contracts went from $822 to $817 per short ton, a 0.6 percent decrease.
Wheat went from 540’0 cents per bushel to 539’0, a 0.2 percent decrease.
Corn started at 458’4 cents per bushel, dropped very significantly to 450’4, but has recovered to 460’4, a slight 0.4 percent increase, relatively unchanged.
Gold went from $3,133.30 an ounce down to $3,069.80, a 2 percent decrease.
Silver went from $34.64 an ounce down to $32.11, a 7.3 percent decrease.
Live cattle from 207.35 cents per pound down to $205.67, a 0.8 percent decrease.
Soybeans went from 1025’0 cents per bushel down to 1007’4, a 1.7 percent decrease.
It’s across the board for the most part, noted Mr. Romano. There are some exceptions. Natural gas, for which demand including for electricity remains high, edged up slightly from $4.076 per MMBtu to $4.146, a 1.7 percent increase.
Now, with commodities and interest rates and therefore future inflation expectations dropping, what does everyone think will happen with inflation going forward?
We think Robert Romano is one of the smartest observers of economic matters and here’s his bottom line on Trump’s tariffs:
Asset prices are dropping for equities and cryptocurrencies, too. When money is withdrawn from assets whether it be stocks, crypto or commodities and put into bonds, prices go down!
This has generally been true historically, too. For example, the Great Depression is often wrongly blamed on tariffs. It’s wrong, the issues had to do with competitive currency devaluations as economies came off the interwar gold standard, but let’s roll with the hypothesis. The problem in the Great Depression wasn’t inflation, it was deflation. Prices were falling.
So, do tariffs cause inflation or deflation? Myopic pundits might try to dissemble and say both. They should make up their minds.
The answer is actually neither. As Milton Friedman always taught “inflation is always and everywhere a monetary phenomenon…” or an increase in the money supply beyond production. Tariffs neither cause nor prevent money printing. Central banks do that all by themselves.
Maybe what’s really happening is whatever negative news there happens to be, investors and their mouthpieces will just ascribe that to tariffs. But good luck changing people’s expectations from what they’ve been spoon-fed for three months.
The American people were told prices would go up with tariffs — and they’re going down. Who could have foreseen such a likely outcome?
Robert Romano is the Executive Director at Americans for Limited Government Foundation and Americans for Limited Government, to read his regular columns for ALG subscribe to The Daily Torch.
