#tariffs + #economics

Trump said at the roundtable, adding "this money would not be possible without tariffs."

Another way to spend the money that’s already been spent many times over.

Research by Harvard Business School Professor Alberto Cavallo illustrates the downward trend in the price levels for many retail goods, followed by an acceleration after tariff announcements. Prices on both imported and domestic goods have climbed modestly but steadily since March, even if the hike is still small relative to the size of the tariffs.

The researchers created indexes with daily prices collected by PriceStats, a private firm cofounded by Cavallo that provides online data for over 350,000 products sold by five major US retailers. The indexes allow them to track price changes in specific categories and from countries of origin. Overall, the prices of imported products have increased faster than those made in the US. An extended analysis, going back to January 2024, explores price changes of goods relative to their pre-tariff trend.

Current Tariff Rate: Consumers face an overall average effective tariff rate of 17.9%, the highest since 1934. After consumption shifts, the average tariff rate will be 17.4%. (If IEEPA tariffs are invalidated, the rate would be 9.1%.)

Overall Price Level & Distributional Effects: TBL assumes the Federal Reserve “looks through” the tariffs and allows prices to rise such that the tax burden is felt through prices rather than nominal incomes. The price level rises by 1.3% in the short run, representing a loss of $1,800 for the average household and $1,000 for households at the bottom of the income distribution. (Without IEEPA, the price level impact would instead be 0.6%.)