150 Years of Data Destroy Democrat Dogma on Tariffs: Fed Study Finds They Lower, Not Raise, Inflation
The comments below are an edited and abridged synopsis of an article by Tyler Durden, ZeroHedge
A groundbreaking working paper from the Federal Reserve Bank of San Francisco—analyzing 150 years of tariff policy in the US, UK, and France—challenges conventional wisdom. Rather than driving up consumer prices, the study finds that higher tariffs consistently lower inflation, while simultaneously increasing unemployment.
Researchers Régis Barnichon and Aayush Singh examined tariff shifts between 1870 and 2020. Their data shows that when average tariffs rose by roughly four percentage points, inflation (as measured by CPI) fell by around two percentage points, and unemployment rose by about one.
This finding directly contradicts traditional economic models, which predict that import duties act as a cost-push inflation driver. Instead, the authors suggest that tariff hikes operate primarily through a demand-side channel: They create uncertainty, reduce asset prices, and depress consumer demand, which together exert downward pressure on inflation.
Notably, tariff announcements often coincide with sharp drops in stock markets and increased volatility. These shock effects, the study argues, compress demand and rattle confidence, contributing to the negative demand impulse.
The implications for policymakers—and especially the Fed—are profound. If tariffs lower, not raise, inflation, then traditional monetary responses (such as holding or raising rates to combat expected price surges) may be misguided. Barnichon and Singh argue that central bankers may have misread tariff shocks, responding in ways that amplify economic weakness rather than tame inflation.
The authors also note a surprising lack of empirical research on the macroeconomic effects of tariffs, suggesting that decades of economic orthodoxy around import taxes may rest more on theoretical assumptions than real-world evidence.
Although the modern-era evidence is less precise, the authors maintain that the historical relationship remains significant: Tariff increases were consistently associated with lower inflation and weaker economic activity.
Ultimately, the study reshapes how trade policy should be understood. It calls into question long-held, widely accepted views, especially the notion that tariffs are automatically inflationary. The authors do not take a political stance, but they do suggest a reassessment: If the dominant inflation argument against tariffs is empirically flawed, then debates over trade can (and should) be reframed around national production, employment, and strategic economic resilience.
