Despite not having concrete proof, I think there's a fairly plausible chain of events from tariffs to broader price increases. Trump's tariffs include a 10% tariff on Canadian oil and gas. If you're in a region that relies heavily on these things coming from Canada you're going to see prices go up on your monthly energy bills, fuel for your vehicle, etc. This also affects local businesses and directly increases their costs. Businesses can only absorb so much of an increase before they raise prices. Now you're able to buy even less between your increased monthly expenses and the higher prices in stores. This makes you go to your boss and ask for a raise just so you can keep up with what your purchasing power used to be. If your boss gives you that raise, the business sees their expenses go up again and may need to raise prices as a result.
In the scenario I described above, what step do you think won't happen that allows us to prevent higher energy prices from leading to inflation?
[0] https://carnegieendowment.org/china-financial-markets/2021/0...
Tariffs result in higher costs to consumers in the short term due to the additional tax consumers have to pay. This extra tax is harmful to the economy. The reduction in economic growth is deflationary and sufficient to counter inflationary pressure from higher prices on tariffed goods. As a result, tariffs should lead to deflation or have at most a neutral effect on inflation.
Did I sum that up correctly?
I'm not sure there is overall inflationary pressure from the higher prices on tariffed goods, but yes. It's a dynamic system, and I believe that people change their behavior and buying patterns in response to taxes. This is my belief, and I have no real evidence other than the fact that the rate of CPI growth did not increase after the 2018 tariffs until after the COVID stimulus came into effect.