Stephen Miran on Tariffs: No Pain for American Consumers

Analyzing Tariff Impact on Inflation

• 💡 The Council of Economic Advisers (CEA) examined PCE and CPI inflation data to assess the impact of tariffs on goods.
• 🔬 By analyzing subcomponents of goods, they distinguished between prices originating in the US versus abroad.

Findings on Imported Goods Prices

• 📉 Since December, overall goods prices in PCE data have risen by 0.4%, while imported goods prices have decreased by 0.1%.
• ⚠️ This indicates that tariffs have not led to significant price pressures on imported goods; the opposite trend has been observed.
• 📊 Similar patterns emerge in core inflation data, with imported goods prices remaining relatively flat or decreasing compared to domestically produced goods.

Addressing Concerns About Future Inflation

• ⏳ Critics suggest that the inflationary effects of tariffs may still materialize, but evidence has not emerged over many months.
• 🚫 There is no sustained pattern of tariff-driven price pressure, even in high-frequency data, similar to observations in 2018-2019.

Economic Theory and Tariff Burden

• ⚖️ Basic economic theory suggests that the party with more inflexibility ultimately bears the burden of a tax or tariff (tax incidence).
• 🎯 The CEA expects that, in the long run, foreign countries subject to tariffs will bear the burden.
• ✅ Current data shows no short-term pain for American consumers due to tariffs.