“Tariffs can’t be inflationary because if the price of one thing goes up, unless you give people more money, then they have less money to spend on the other thing, so there is no inflation.”
As James Fallows explained:
This is from the guy who is supposedly “the smart one” in the new Trump lineup. To spell this out: By the “logic” of future Treasury Secretary, by definition NOTHING can ever be inflationary. Gas goes to $15, you just spend less on … eggs.
So it’s no biggie?
It appears that Besset believes in the creed of Milton Friedman that “inflation” can only happen because of increases in the money supply. Ok. But that assumes that when prices go up from these tariffs, people will understand that it isn’t inflation so they will happily stop spending money on the things they want and simply substitute for things they don’t want. Good luck with that. If there’s one thing we have learned over the past couple of years it’s that people are freaked out by price hikes, period. I don’t think anyone’s going to care whether that fits the academic definition of inflation.
*needless to say, Trump’s cult will believe that the economy is fantastic no matter what happens. The only question is whether there is a majority that will be upset about it.