I see a lot of claims about how Taiff could have an impact on the economy. Some of my views on this issue are as follows:
1. The most impact of tariffs is not the impact on inflation.
2. The most important impact of tariffs is not the impact on the business cycle.
3. Most economists overestimate the impact of “real shocks” such as inflation and tariffs on the business cycle.
4. The most important economic impact of tariffs is long-term economic growth. (There are other non-economic consequences, such as increased risk of war.)
5. Most economists do not overestimate the impact of tariffs on long-term growth.
6. The impact of tariffs on business cycles and inflation depends heavily on the response of monetary policymakers.
7. Montarypoli has no arost in how tariffs affect long-term growth.
8. Given how most average people are doing, they think in terms of business cycles and inflation, and are not a much more important trend in long-term growth.
9. There is a “big doom in the country”, and even in Hemben, even a big real shock, has a small impact on long-term growth. But these seemingly small effects are indeed important. The long-term growth rate is down 0.2% from farms rather than a 2% decline in GDP over the past year.
Putting together nine points, you have a wide range of misconception recipes that will take you away from Restory Trad War. I don’t know how much financial offset we might get. And it’s not clear how much tariffs the administration will adjust in weeks and months. Therefore, non-logarithmic predictions about inflation and business cycles are not possible. However, I provide some tentative observations.
1. I am confident that the current tariff levels themselves are not sufficient to cause a recession. Nevertheless, the recession is positive due to the interaction of tariffs and monetary policy. Simply put, trade wars are likely to reduce interest rates on balance or nature, and will likely make monetary policy stronger in 2025. If the previous priestly poly has expanded too much and the inflation rema has not expanded too much, then we recommend reducing interest rates.
2. Recent GDP has kept the economy under control in the first quarter. Current growth is likely higher than the reported large inventory accumulation has been overlooked. Simply put, many products have appeared as negatives in the import category (at the dock), but have not yet been listed as positives in “inventory investments” (warehouses). For the same reason, second quarter growth is almost certainly exaggerated. Focus on monthly data like job reports to see what’s really happening.
3. The administration faces an interesting dilemma. They failed to deal with the trade deficit, and retreating the trade war can avoid a recession. Or, at the expense of risking the recession, you can push ahead in a more aggressive trade war. Recessions usually reduce trade deficits.
4. I consider manufacturing to be overlooked. But if they have to acquire it in manufacturing, they will commit more crimes on manufacturing output than regaining manufacturing employment. In other words, chip manufacturing is not an iPhone assembly.
