Mark Blyth and Nicolò Fraccaroli in The Guardian:
Inflation is, at base, a tax on consumption – and it hits the poor the hardest, since they consume more of their incomes and the rich consume less.
That’s one reason for concern over Donald Trump’s tariffs, which will disproportionately affect the poor. When the 90-day pause on the tariffs expires, it is reasonable to expect prices to rise, and by a lot.
That’s because, first, intermediate goods – rather than finished ones – dominate trade, crossing borders and being tariffed multiple times along the way, which makes them highly inflationary. Second, while the tariffs of the first Trump administration could be more easily absorbed by exchange rates and producers, there is no way tariffs of this magnitude can be absorbed. Producers and consumers must take a hit, and that means rising prices. It looks like the poor, once again, will suffer the most.
But if Trump’s tariffs were to disappear for good, would we return to a world of stable prices? Insights from our forthcoming book, Inflation: A Guide for Users and Losers, suggest that is sadly not the case, for three reasons.
More here.
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