Tariffs. Inflationary or not?
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Winter
 March 03 2025
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    Answer: Not inflationary.

    Explanation:

    "Inflation is everywhere and always a monetary phenomenon"- Milton Friedman.

    Inflation happens when the issuer of the currency counterfeits his own currency.  That is, like any good counterfeiter, he successfully makes more of it.

    That's it.

    Inflation isn't due to people's poor morals and spending their own money irresponsibly.  That is a convenient way for the government to sidestep it's culpability.  I do remember that line as a pretty young child in the 1970's.  I do.  And it was 100% bullshit.

    Inflation is the supply and demand thing of too much money chasing too few goods.  Yes.  Due to overprinting it.

    It is not due to Tarriffs.

    Why?

    Let's literally just take a few minutes to think it through.

    By the way, a tariff and a tax, these are the same. 

    An example:

    Congestion pricing in NYC and the story of 2 parking garages

    Some weeks ago a new rule, Congestion Pricing, came into effect.  If you drove below 60th street, in the sweetest part of the city, you would get charged $9.  This was said to be something to reduce congestion but it didn't do that.  It was just another money grab from the people- most of whom were guilty of trying to do business and provide a service- a punishment that they didn't deserve.

    So what happened?  

    The story of 2 parking garages- Prior to the congestion pricing, there were 2 garages, one on 61st street and one on 59th st.  Both charged the same- the exact same.  After the congestion pricing the garage below 60th street charged less- exactly the amount of the congestion pricing was deducted from their fee.

    So who did the congestion pricing punish?  The businesses below 60th Street.  Just like any good democrat edict, it was anti capitalism and anti hard work.  It punished those whose only crime is the desire to work hard and get paid for their efforts.

    So let's consider Canada.  Soon they will have to pay a 25% tariff.  Knowing what we know from the example above we can imagine that the Canadian company will have to eat some or most or all of the 25% tariff.  Not the country of Canada.  Not the taxpayers of Canada or the taxpayers of the US.  Not the US customer.  Please do not forget that to the extent that the Canadian company does not reduce their prices and their profit to compensate for the tariff, the would be US consumer is not forced to buy the Canadian product at gunpoint.  If the price is higher, the consumer can just choose not to buy it.  The tariff or tax on an item produced outside of this country is a better way to raise money for the government than income tax in my opinion.  And it doesn't have a damn thing to do with inflation.  The opposite actually.  Taxes take money out of circulation and to the extent that a new tariff or tax is created and paid for, that money is being taken out of circulation- if it is used to pay down debt, that is (as opposed to printing money to pay down the debt).  If it is used to fund more government jobs and to grow government, then the money is not taken out of circulation.

    Now, if the tariff is on something that is a necessity, then the consumer is punished.  Like oil at this time.  Perhaps that is why Trump only put a 10% tariff on Canadian oil but 25% on everything else.

    But the anti-Trump news media yells that the sky is falling and that Tariffs will equal inflation and that is touted on financial news stations as well.  Shame on them.  They should know better (and likely do).

       

    tariff inflation milton friedman taxes congestion pricing trump
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