Just Math, Silly: Understanding Tariff Inflation

Inflation isn’t always what it seems. We unpack base effects, transitory spikes, and why Boeing wins while you pay more.

 

KEY TAKEAWAYS

• Japan cut a trade deal with the U.S. including 15% tariffs and $550B in U.S. investments
• The 15% tariff will likely be passed on to U.S. consumers, not absorbed by importers
• This causes transitory inflation—a one-time price hike, not a persistent increase
• Inflation measurements will show high annual readings that eventually drop due to base effects
• Winners: Boeing, defense contractors, rice farmers; Losers: consumers and tariff-affected import goods

MY HOT TAKES

• No matter how you do the math–whatever you call it–consumers and investors pay for the tariffs
• Japan played the long game—secured its market while appearing to make concessions
• Inflation numbers are easily misunderstood thanks to base effects
• The Fed shouldn’t react to short-term price jumps that don’t persist
• Politicians will scream about inflation that’s already priced in
• You can quote me: “Tariffs don’t hurt exporters if no one can make it cheaper—consumers just get the bill, and inflation appears as the net result.”