Trump may be raising your taxes with his tariffs but he could actually cut inflation with them, too, SF Fed says

Tariffs are a tax on you, the consumer. That’s the undisputed fact about how tariffs function, with the levies falling on companies, which then typically pass a great percentage on to the final shopper. Voter anger about affordability built throughout 2025, culminating in offyear elections that swept Democrats such as New York City’s new Mayor Zohran Mamdani into office, prompting an angry President Trump to complain that affordability is a “hoax” when Democrats talk about it, as he’s vanquished inflation since coming into office.

But what if tariffs actually cut inflation instead?

The widely-held “cost-push” theory posits that tariffs drive up domestic production costs by making imported input more expensive. That entails a drop in economic activity and higher inflation in the short run. A new analysis from the San Francisco Federal Reserve Bank, an economic letter titled “What Can History Tell Us About Tariff Shocks?” contradicts the longstanding economic consensus that tariffs raise inflation. In fact, it claims the opposite will result: higher tariffs will lead to lower inflation (and higher unemployment).

“Our analysis of historical data highlights ...