It’s headline news right now that inflation is hitting the United States. And according to some pundits there’s a clear scapegoat for rising prices: the tariffs imposed by the Trump administration in 2018. In reality, this is nothing more than special pleading by importers disguised as economic argument—and there’s simply no basis for such claims. But that hasn’t stopped Washington’s import lobby, which prefers to flood the nation with cheap goods from China, from once again trying to rewrite U.S. trade policy.
It’s important to remember why the tariffs were initiated in 2018. They were imposed on industrial products such as solar panels and steel after lengthy federal investigations into heavily dumped imports. And the tariffs President Trump placed on a broad array of Chinese goods followed an exhaustive study of Beijing’s unfair trade practices, including forced technology transfer and intellectual property theft.
The tariffs were a justified response to years of trade cheating—particular on the part of China. However, some economists simply want to follow their outdated textbooks rather than common sense. And so they’re now claiming that the inflation currently hitting COVID-wracked America must be from the 2018 tariffs.
Federal data makes clear that this is baseless. According to the Bureau of Labor Statistics, December gasoline prices were up 49.6% from the previous year; meat and related products were up 12.5%; new vehicles were up 11.8%; and, used cars and trucks were up 37.3%. Significantly, not one of these sectors is directly tied to the 2018 tariffs.
Still, consumer price inflation is running at 7% as of December 2021—the highest annual rate in 39 years, according to the Bureau of Labor Statistics. So what gives?
The most important contributor to current U.S. inflation is fuel. Crude oil prices closed out 2021 at $75.33 a barrel, up roughly 50% from December 2020. Why the big jump? Because OPEC cut production after oil prices plunged during the initial COVID pandemic. Since that time, however, demand has recovered faster than available supplies.
Food prices are also driving inflation. A key concern is the rise in meat prices, with meat and poultry costs up a hefty 12.8% year-on-year. The Biden administration is now considering an investigation into the pricing practices of the meatpacking industry, including current rules that allow foreign beef to be labeled as “Made in USA” after only minimal repackaging.
These fuel and food prices are unaffected by U.S. trade policy. But new and used car prices have shot up as well. Why? The answer is the present shortage of microchips, which has caused a drastic reduction in the availability of new vehicles—and also prompted automakers to allocate scarce microchips to their most expensive vehicles. That’s now driving up the average price for both new and used cars. Sadly, this is what comes from the offshoring of U.S. microchip production over the past 25 years—even though the United States pioneered the invention of the computer chip.
Still, some pundits want to blame all current ills on the tariffs. And yet the price of many tariffed goods actually declined in 2019. For example, before the 2018 tariffs, prices for hot-rolled band steel were roughly $700 a metric ton. In 2019, hot-rolled band steel actually dropped to an average of $600 a ton—despite the 25% tariff.
Realistically, the COVID pandemic is driving much of current U.S. inflation. While consumer demand plummeted in the early months of 2020, it has subsequently rebounded—and more recently skyrocketed. But the global supply chain has proven inadequate to meet these recent needs, with container ships now backed up outside ports in both the U.S. and Asia.
The best way to insulate the U.S. economy from such shortages is to start rebuilding production at home. And that means continuing the tariffs intended to contain China’s aggressive aims. Otherwise, the U.S. will face another record-setting annual trade deficit—and an increased dependence on imports that could make future goods shortages and inflation more likely.
Jeff Ferry is chief economist at the Coalition for a Prosperous America. Follow him at @menloferry.