The lede sets the table for my thought, even while mixing similes or metaphors or somethings.
The highest tariffs in almost a century haven’t caused the massive surge in inflation many economists feared. But that shouldn’t have come as a surprise, according to two new studies.
Begin with the understanding that today’s economy, both domestic and as we interact and intertwine with other nations’ economies, is far more complex than it was during the 19th and early 20th century heydays of tariffs.
Within that understanding, we don’t know the lags, if any, between tariff implementation and domestic price increases. That’s true whether the tariffs are implemented in specific economic areas or across the domestic board. Nor do we understand the mechanisms by which tariffs on foreign goods and services have their effect on domestic goods and services or on our economy in general. Nor do we understand the pathways by which those mechanisms might work their effects.
Each of these must be determined empirically, and that takes time. Presently, we’re in a nation-wide experiment that will provide the data that will let us understand each of these unknowns.
For how long must this experiment run before we can say reasonably definitively that tariffs are not having more than a minor effect on prices? That’s also unknown, but I suspect an outer bound on that is a couple of years.
Disruptive in the near term the Trump tariffs—or at least his rhetoric about them—might seem to be, it’s much to soon to assess their disruptiveness or lack in the intermediate and longer terms.