We’re looking at Stagflation, unless the tariffs are brought back to the previously agreed upon Trade Agreements.
We’re already seeing high prices and Walmart says they can’t keep prices down . Tariffs are a tax increase to the poor and middle classes. The costs of our necessities will increase.
From Paul Krugman, economist!
Does cutting U.S. trade with the world in general by half and reducing trade with China by two thirds sound to you like Trump calling off his trade war? It sounds to me like a massive disruption of the world economy, only slightly less disruptive than what we were looking at last week.
What about the impact on U.S. families? Tariffs are sales taxes levied on American households; don’t let anyone tell you different. Walmart declared yesterday that it will have to begin raising prices later this month because of the tariffs.
And tariffs are regressive sales taxes that fall much more heavily on lower-income Americans than on the affluent, for three reasons. First, low-income households spend a higher fraction of their income. Second, compared with the affluent, poor and working-class families spend more on goods, which are facing tariffs, as opposed to services, which aren’t. Finally, the goods whose prices will rise most tend to be items like clothing that loom large in lower-income families’ budgets.
The Budget Lab has estimated the effects of the new tariff plan on households’ purchasing power at different levels. This is a huge hit to real incomes in the lower parts of the income distribution:
Two further points about where we are right now on tariffs. First, nothing that has been announced is any kind of lasting commitment. Everything is at most an announcement about what tariff rates will be for the next 90 days. Nobody, very much including Trump himself, knows what policy will be a few months from now. We’re still living with huge uncertainty, which means an environment in which it’s impossible for businesses to make long-term plans.
Second, everything Trump is still doing on tariffs is a violation of longstanding international agreements. You may think you’ve made a deal with America, but U.S. officials treat solemn deals like suggestions at best.
In other words, not much has changed since last week. We may not be looking at the complete economic meltdown that seemed quite possible (and is still a possibility), but we’re still looking at much higher inflation and an economic slowdown at best — i.e., stagflation.