Robert Romano
Prices of goods and interest rates collapsed Announcement of mutual tariffs Among the American trading partners, despite the forecasts of Congress Democrats that inflation will boost as a result of tariffs.
Petroleum From USD 72.22 before an announcement of up to USD 66.12 per barrel from this letter a decrease by 8.4 percent.
Hot coil steelIn June contracts, they increased from USD 822 to USD 817 for a brief ton, which is a 0.6 percent decrease.
Wheat from 54,000 cents for Buszela to 539’0, which is a decrease of 0.2 percent.
Corn It started from 458 cenas for Buszela, it dropped significantly to 450’4, but recovered to 460’4, which is a petite boost of 0.4 percent, relatively unchanged.
Gold He returned from $ 3,133.30 per ounce to $ 3,069.80, which is a decrease of 2 percent.
Silver He returned from USD 34.64 per ounce to USD 32.11, which is a decrease by 7.3 percent.
Live cattle From 207.35 cents per pound to USD 205.67, which is a 0.8 percent decrease.
Soy He returned from 1025’0 cents for Buszela to 1007’4, which is a 1.7 percent decrease.
It is all for the most part. There are several exceptions. Natural gasFor which demand, including electricity, remains high, slightly increased from USD 4.076 per mmbtu to USD 4.146, which is an boost of 1.7 percent.
But we can see that the overall trend is actually lower prices, not higher prices. The reaction to the tariffs is not about buying and bidding of goods, increasing inflation, the opposite of what to sell them. Remember that.
And this happens with interest rates – another very reliable indicator of inflation expectations – Z 10-year treasure fell from 4.2 percent to 4.01 percent. 2-year treasures I did the same, falling from 3.91 percent before the announcement of up to 3.72 percent.
All this is the exact opposite of what the democrats anticipated as a result of tariffs.
Only on March 2, the leader of the Senate minority Chuck Schumer (Dn.y.) Boldly anticipated“President Trump’s tariffs will raise prices for families by up to USD 1,200 per year.”
March 11, just yesterday, Schumer declared“Inflation increased under Donald Trump, from food to retail to cars.” (See below: both food and cars have not experienced any boost in prices in February, the first full month of Trump’s presidency).
On February 1, the leader of the home minority Hakeem Jeffries (Dn.y.) similarly he suggested that prices would riseStating: “Tariffs imposed by administration and strongly supported by the Republicans of House will not reduce the high costs of living for everyday Americans. Instead, it will probably do it exactly the opposite and make life more expensive.”
March 3 Senator Elizabeth Warren (D-Mass.) Also Forecast price increasesSaying: “Donald Trump promised to reduce costs on” day 1 “, but instead of this working family must worry about giant corporations using their random tariff ads as an excuse to raise prices – and the Trump administration does not plan to stop it.”
None of this was true. In February, consumer inflation fell from 3 percent annual in January up to 2.8 percent, According to the latest data Bureau of Labor Statistics.
Now, in the case of goods and interest rates, and therefore future inflation expectations, what everyone thinks that inflation will become in the future?
Basically, trading partners will certainly react in nature, and in addition to tariffs, another way to guarantee that the result is the weakening of their currency-so called currency manipulation-to boost exports to the United States.
China is already doing this again. In mid -March yuan course for dollar It was 0.1383, now it is down. 1376, not much, but it is 0.5 percent of the depreciation.
Other trading partners will eventually follow in their footsteps, especially if their export economy suffer in a brief period of tariffs. Their economy will leisurely down and weaken their currencies in response to an boost. Bet on it.
This will eventually boost the American dollar.
And prices will fall thanks reverse relationship between dollars and goodsAlso, with a sturdy dollar correlating with lower goods prices and a delicate dollar, correlating with higher prices of goods.
Asset prices also fall for shares and cryptocurrencies. When the money is withdrawn from assets, regardless of whether they are shares, cryptographic or goods and put bonds, prices fall!
Basically, it was also historically real. For example, a great crisis is often wrongly blamed for tariffs. That’s bad, the problems concerned Davors of competitive currencies As the economies fell from the interwar gold, but let’s translate with a hypothesis. Inflation was a problem in the great crisis, it was deflation. Prices were falling.
So do tariffs cause inflation or deflation? Chatters can try to recognize and say both. They should make a decision.
The answer is not like that. Like Milton Friedman, he always taught: “Inflation is always and everywhere a monetary phenomenon …” or an boost in money supply outside production. The tariffs do not cause or prevent printing of money. Central banks do it all alone.
Maybe what really happens is any negative message, investors and their mouthpieces assign it to tariffs. But good luck, changing the expectations of people from their spoon feeding for three months.
The American nation was told that prices would rise with tariffs – and fell. Who could predict such a probable result?
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Robert Romano is the executive director of the Americans for Limited Government Foundation.
