Fact Check: Tariffs don’t influence prices

Introduction

The claim "Tariffs don’t influence prices" suggests that the imposition of tariffs—taxes on imported goods—has no effect on the prices consumers pay for goods and services. This assertion is contentious and invites scrutiny, as tariffs are generally understood to impact market dynamics, including pricing. This article examines the available evidence and expert opinions regarding the relationship between tariffs and prices.

What We Know

1. Economic Theory on Tariffs: Tariffs are designed to increase the cost of imported goods, which can lead to higher prices for consumers. According to a study by UC Davis, tariffs typically increase the cost of goods as companies often pass the additional costs onto consumers 2.

2. Historical Data: Research covering U.S. tariffs from 1870 to 1909 indicates that a 10 percentage point increase in tariffs led to significant price increases for consumers 2. This historical perspective suggests a consistent relationship between tariffs and consumer prices.

3. Recent Studies: A 2019 study by the Federal Reserve Board found that tariffs on steel and aluminum resulted in job losses in the manufacturing sector and also contributed to increased costs for consumers 4. This aligns with the broader economic consensus that tariffs can lead to higher prices.

4. Expert Opinions: Economists from the University of Chicago have noted that tariffs can strategically shift global prices and impact consumer costs 3. Additionally, a global economist from Brown University stated that while a 10% tariff might not drastically affect the overall economy, it would still raise prices for consumers 5.

5. Conflicting Views: The Economic Policy Institute claims that tariffs implemented during President Trump's administration showed "no correlation with inflation" and had fleeting effects on prices 8. However, this perspective is contested by other studies that indicate a clear relationship between tariffs and price increases.

Analysis

The evidence surrounding the claim that "tariffs don’t influence prices" is mixed and requires careful evaluation of the sources:

• Credibility of Sources: The studies from UC Davis and the Federal Reserve Board are peer-reviewed and published by reputable institutions, lending them credibility. However, the Economic Policy Institute's findings, while also credible, may reflect a specific political agenda, given its association with labor interests 8.

• Bias and Reliability: The University of Chicago's insights are based on expert analysis, which is generally reliable but may reflect the institution's economic philosophy. The Brown University economist's statement, while credible, is anecdotal and lacks empirical backing in the context of broader economic data 5.

• Methodological Concerns: Many studies rely on historical data and economic models that may not account for all variables influencing prices. For example, the impact of tariffs on supply chains and consumer behavior can vary significantly across different sectors, making it difficult to generalize findings 46.

• Additional Information Needed: A more comprehensive analysis would benefit from longitudinal studies that track price changes over time in response to specific tariff implementations across various industries. Furthermore, consumer sentiment and purchasing behavior in response to price changes due to tariffs could provide deeper insights.

Conclusion

Verdict: False

The claim that "tariffs don’t influence prices" is determined to be false based on a substantial body of evidence indicating that tariffs generally lead to increased prices for consumers. Key evidence includes economic theory suggesting that tariffs raise the cost of imported goods, historical data showing significant price increases in response to tariff hikes, and recent studies linking tariffs to higher consumer costs.

However, it is important to acknowledge the nuances in this verdict. While the majority of evidence supports the idea that tariffs influence prices, some studies, such as those from the Economic Policy Institute, suggest that the relationship may not be straightforward and could vary based on specific circumstances. Additionally, the methodologies of various studies may introduce limitations, as they often do not account for all variables affecting prices.

Readers are encouraged to critically evaluate the information presented and consider the broader context of economic policies and their implications. The relationship between tariffs and prices is complex, and ongoing research is necessary to fully understand its dynamics.

Sources

1. Are tariffs bad for growth? Yes, say five decades of data from 150 countries - PMC. Link
2. How Could Tariffs Affect Consumers, Business and the Economy? | UC Davis. Link
3. How do tariffs work, and who will they impact? UChicago experts explain | University of Chicago News. Link
4. The Effect of Tariffs on the US Economy | Economic Forecast Project. Link
5. A global economist’s take on tariffs: ‘American consumers will get hurt’ | Brown University. Link
6. Are tariffs good or bad for the economy? Research says they can be bad for the supply chain - Georgia State University News. Link
7. What are tariffs, and why are they rising? Link
8. Tariffs Work — and President Trump's First Term Proves It. Link
9. Understanding Tariffs: Impact, Trade Tensions, and the U.S. Economy. Link
10. The Economic Effects of Tariffs. Link