Well known economists, the kind that appear in the Wall Street Journal or regularly on CNBC, are coming around on tariffs. For the most part, many on Wall Street always did like the idea of tariffs as revenue because they were concerned about the $2 trillion fiscal deficit, and felt tariff revenue would lead to tax cuts elsewhere. Where they have come around most is on the inflation side of things. Tariffs were supposed to be inflationary, but so far, they’ve been proven wrong. Inflation over the last several months was not caused by 10% tariffs on Southeast Asia, nor by the short-lived 145% tariffs on China. It was caused by unimported services. Economists are now luke-warm on tariff-induced inflation.
Huw Pill, a member of the monetary policy committee at the Bank of England (BoE) said that the start of the U.S./UK trade deal on Monday would not “change things dramatically for inflation.” He sourced the BoE’s own report of the 10% tariff reducing inflation by around 0.2 percentage points.
Claudio Irigoyen, head of Bank of America’s Global Economics Research, wrote in his midyear review in June that inflation will peak at lower-than-expected levels of 3.1% this year.
The most recent annual inflation rate is 2.4% for the 12 months ending May 2025. The CPI rose 0.1% in May 2025 on a seasonally adjusted basis, likely staying flat due to importers bulking up on orders before the April tariffs kicked in.
The next update, covering June 2025, will be released on July 15, 2025 and this is the one that will start to paint a better picture on inflation drivers. Will it still be services? Or will we see lower consumer spending due to higher priced imports. For now, one look at Home Depot, China’s Shein, or clothing companies like Land’s End, still boasts “up to 40% off” everything from patio furniture (surely an import) and women’s bathing suits.
Moreover, the Fed’s preferred inflation metric, the core PCE index, grew at a mild rate of just 1.2% annualized over the last three months — near its lowest level since the pandemic. Even the San Francisco Fed’s decomposition of inflation shows most price pressures are supply-driven and temporary, not systemic or demand-fueled, CPA senior economist Mihir Torsekar noted in a recent report.
Why Wall Street Wants Another Tariff Pause
Market influencers like billionaire Bill Ackman, CEO of the Pershing Square Capital Management hedge fund, advocated for a 90-day pause on Trump’s so-called reciprocal tariffs from April 2. He got those, but that pause ends next week. Trump said countries will be “sent a letter” telling them what their tariff rates will be going forward.
This lack of certainty is what seems to be souring most on tariffs, a policy that to date has not led to inflation blowups, force majeurs, and mass layoffs.
Torsten Sløk, chief economist at New York-based asset management firm Apollo, said a year-long pause in higher tariffs would be welcome. Apollo as a whole is opposed to tariffs and says tariffs will slow the economy and lead to higher inflation.
“Maybe the strategy is to maintain 30% tariffs on China and 10% tariffs on all other countries and then give all countries 12 months to lower non-tariff barriers and open up their economies to trade,” he wrote on June 21.
“Extending the deadline one year would give countries and U.S. domestic businesses time to adjust to the new world with permanently higher tariffs, and it would also result in an immediate decline in uncertainty, which would be positive for business planning, employment, and financial markets. This would seem like a victory for the world and yet would produce $400 billion of annual revenue for U.S. taxpayers. Trade partners will be happy with only 10% tariffs and U.S. tax revenue will go up,” he said.
Wall Street is fine with the 10% tariff, something we never thought we would ever see. Missing from this commentary is the 25% Section 232 tariff on cars and car parts, 50% on steel and aluminum, and around 55% placed on China.
And while the market has definitely learned to live with the 10% tariff, there seems to be a disconnect between what the higher sectoral tariffs bring to the domestic economy and labor market.
Tariffs Beyond Revenue
For tariffs to work as a reshoring tool, a strategy described by the America First trade agenda back in January, they need to be costly enough for global corporations to shift production to the U.S. instead of importing.
This is happening in pockets.
Nearly all of the investments in domestic manufacturing have been the result of Section 232 tariffs, the CHIPS Act, and the Inflation Reduction Act. Other sectors have benefited here and there due to high tariffs these companies won in anti-dumping cases, such as solar in some cases, and kitchen cabinets. Without these things, it is questionable whether there would be any growth in industrial capacity at all.
Automotive, steel and aluminum investments have benefited from sector tariffs.
Hyundai committed to investing $21 billion in the U.S. from 2025 to 2028, focusing on expanding manufacturing and innovation capabilities in automotive, a new steel mill for cars, and robotics via their Boston Dynamics subsidiary.
GM announced a $4 billion investment in three U.S. assembly plants in June 2025, including moving or increasing production of two vehicles they also make in Mexico to the U.S.
Almost 85% of respondents to a Thomas data platform, the largest industrial sourcing platform in North America, said they plan to order more from North American suppliers — of which 40% said they are likely to add North American products or raw materials suppliers to their supply chain in the next 12 months, while 31% said they are very likely and 13% said they are extremely likely to do so.
Some 41% of global automotive manufacturers told Thomas they want to reshore manufacturing operations to the U.S. this year.
The U.S. steel and aluminum industries have invested over $20 billion in growth and modernization since the original Section 232 tariffs were introduced in 2018.
The aluminum industry has invested more than $10 billion since 2016, primarily in mid- and downstream production and recycling, driven by growing demand and tariffs.
“The fact that tariffs could generate several hundred billion dollars in revenue for the Treasury and that the tariffs have had no visible impact on consumer prices is all very well and good, but the most important goal of tariffs is to rebuild and re-shore U.S. industry,” said Jeff Ferry, chief economist emeritus of CPA. “We have seen some signs of that so far but only in a few industries. Automotive and steel are very important industries and are a good example of how tariffs have a substantial and persistent effect on rebuilding industries, but to get there you need to have a tariff set at a level of 25% or above and sustained for a long period of time. Because as many business leaders have said, businesses need time and a clear runway to adjust and make plans to invest here in the U.S.,” he said.
What’s Next? Tariffs on Money?
The overvalued dollar, though a little less overvalued today than it was a year ago against our biggest trading partners, is one of the main reasons why it makes financial sense to import. The dollar goes further overseas, especially in moderate- to low-income nations like China and Mexico.
Big name economists are already putting feelers out there…or, perhaps, sharing warnings to their readers.
“The U.S. is likely to fail to cut its external deficit just by raising tariffs, unless protection is set at totally prohibitive levels,” Martin Wolf wrote in the Financial Times on June 24. “Otherwise tariffs just shift the composition of production, from exportables towards import substitutes, with little effect on the trade balance. If it wants to accelerate a global discussion of imbalances with a policy intervention, the obvious one would not be tariffs but a tax on capital inflows.”
In the same paper in March, columnist Gillian Tett wrote an op-ed titled “Tariffs on goods may be a prelude to tariffs on money.” In it, she said Washington’s tariff policy could one day extend to capital flows — suggesting that “tariffs on goods may be a prelude to tariffs on money.”
Trump has changed the discussion on trade – it’s unlikely ever going back to pre-2016.
“Wall Street economists and financial pundits are finally starting to admit what we’ve known all along: tariffs are not some inflationary monster,” said Andrew Rechenberg, CPA economist. “They like the revenue tariffs generate, but it’s time they take the next logical step and recognize that tariffs drive reshoring, rebuild domestic industry, and deliver real, productive economic growth. Tariffs are the most efficient tax the government can use, raising revenue, strengthening our industrial base, and reducing the burden of less productive, more harmful taxes on the middle class. It’s a win-win, and it’s long overdue for Wall Street to embrace the full picture.”
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
A-List Economists Admit Tariffs Not Causing Inflation and Good for Revenue, But Where is the Reshoring?
Well known economists, the kind that appear in the Wall Street Journal or regularly on CNBC, are coming around on tariffs. For the most part, many on Wall Street always did like the idea of tariffs as revenue because they were concerned about the $2 trillion fiscal deficit, and felt tariff revenue would lead to tax cuts elsewhere. Where they have come around most is on the inflation side of things. Tariffs were supposed to be inflationary, but so far, they’ve been proven wrong. Inflation over the last several months was not caused by 10% tariffs on Southeast Asia, nor by the short-lived 145% tariffs on China. It was caused by unimported services. Economists are now luke-warm on tariff-induced inflation.
Huw Pill, a member of the monetary policy committee at the Bank of England (BoE) said that the start of the U.S./UK trade deal on Monday would not “change things dramatically for inflation.” He sourced the BoE’s own report of the 10% tariff reducing inflation by around 0.2 percentage points.
Claudio Irigoyen, head of Bank of America’s Global Economics Research, wrote in his midyear review in June that inflation will peak at lower-than-expected levels of 3.1% this year.
The most recent annual inflation rate is 2.4% for the 12 months ending May 2025. The CPI rose 0.1% in May 2025 on a seasonally adjusted basis, likely staying flat due to importers bulking up on orders before the April tariffs kicked in.
The next update, covering June 2025, will be released on July 15, 2025 and this is the one that will start to paint a better picture on inflation drivers. Will it still be services? Or will we see lower consumer spending due to higher priced imports. For now, one look at Home Depot, China’s Shein, or clothing companies like Land’s End, still boasts “up to 40% off” everything from patio furniture (surely an import) and women’s bathing suits.
Moreover, the Fed’s preferred inflation metric, the core PCE index, grew at a mild rate of just 1.2% annualized over the last three months — near its lowest level since the pandemic. Even the San Francisco Fed’s decomposition of inflation shows most price pressures are supply-driven and temporary, not systemic or demand-fueled, CPA senior economist Mihir Torsekar noted in a recent report.
Why Wall Street Wants Another Tariff Pause
Market influencers like billionaire Bill Ackman, CEO of the Pershing Square Capital Management hedge fund, advocated for a 90-day pause on Trump’s so-called reciprocal tariffs from April 2. He got those, but that pause ends next week. Trump said countries will be “sent a letter” telling them what their tariff rates will be going forward.
This lack of certainty is what seems to be souring most on tariffs, a policy that to date has not led to inflation blowups, force majeurs, and mass layoffs.
Torsten Sløk, chief economist at New York-based asset management firm Apollo, said a year-long pause in higher tariffs would be welcome. Apollo as a whole is opposed to tariffs and says tariffs will slow the economy and lead to higher inflation.
“Maybe the strategy is to maintain 30% tariffs on China and 10% tariffs on all other countries and then give all countries 12 months to lower non-tariff barriers and open up their economies to trade,” he wrote on June 21.
“Extending the deadline one year would give countries and U.S. domestic businesses time to adjust to the new world with permanently higher tariffs, and it would also result in an immediate decline in uncertainty, which would be positive for business planning, employment, and financial markets. This would seem like a victory for the world and yet would produce $400 billion of annual revenue for U.S. taxpayers. Trade partners will be happy with only 10% tariffs and U.S. tax revenue will go up,” he said.
Wall Street is fine with the 10% tariff, something we never thought we would ever see. Missing from this commentary is the 25% Section 232 tariff on cars and car parts, 50% on steel and aluminum, and around 55% placed on China.
And while the market has definitely learned to live with the 10% tariff, there seems to be a disconnect between what the higher sectoral tariffs bring to the domestic economy and labor market.
Tariffs Beyond Revenue
For tariffs to work as a reshoring tool, a strategy described by the America First trade agenda back in January, they need to be costly enough for global corporations to shift production to the U.S. instead of importing.
This is happening in pockets.
Automotive, steel and aluminum investments have benefited from sector tariffs.
“The fact that tariffs could generate several hundred billion dollars in revenue for the Treasury and that the tariffs have had no visible impact on consumer prices is all very well and good, but the most important goal of tariffs is to rebuild and re-shore U.S. industry,” said Jeff Ferry, chief economist emeritus of CPA. “We have seen some signs of that so far but only in a few industries. Automotive and steel are very important industries and are a good example of how tariffs have a substantial and persistent effect on rebuilding industries, but to get there you need to have a tariff set at a level of 25% or above and sustained for a long period of time. Because as many business leaders have said, businesses need time and a clear runway to adjust and make plans to invest here in the U.S.,” he said.
What’s Next? Tariffs on Money?
The overvalued dollar, though a little less overvalued today than it was a year ago against our biggest trading partners, is one of the main reasons why it makes financial sense to import. The dollar goes further overseas, especially in moderate- to low-income nations like China and Mexico.
Big name economists are already putting feelers out there…or, perhaps, sharing warnings to their readers.
“The U.S. is likely to fail to cut its external deficit just by raising tariffs, unless protection is set at totally prohibitive levels,” Martin Wolf wrote in the Financial Times on June 24. “Otherwise tariffs just shift the composition of production, from exportables towards import substitutes, with little effect on the trade balance. If it wants to accelerate a global discussion of imbalances with a policy intervention, the obvious one would not be tariffs but a tax on capital inflows.”
In the same paper in March, columnist Gillian Tett wrote an op-ed titled “Tariffs on goods may be a prelude to tariffs on money.” In it, she said Washington’s tariff policy could one day extend to capital flows — suggesting that “tariffs on goods may be a prelude to tariffs on money.”
Trump has changed the discussion on trade – it’s unlikely ever going back to pre-2016.
“Wall Street economists and financial pundits are finally starting to admit what we’ve known all along: tariffs are not some inflationary monster,” said Andrew Rechenberg, CPA economist. “They like the revenue tariffs generate, but it’s time they take the next logical step and recognize that tariffs drive reshoring, rebuild domestic industry, and deliver real, productive economic growth. Tariffs are the most efficient tax the government can use, raising revenue, strengthening our industrial base, and reducing the burden of less productive, more harmful taxes on the middle class. It’s a win-win, and it’s long overdue for Wall Street to embrace the full picture.”
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
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