Multiple economic and U.S. government studies have confirmed that tariffs have little impact on inflation and price changes.
On average, countries with higher tariff rates do not have significantly higher inflation rates.
Decades of data demonstrates the inability of imports and free trade to substantially reduce inflation, with millions of job losses as the cost.
An overreliance on imports and an imbalance of trade can be a cause of higher inflation, especially during global crises when domestic supply is crucial.
The long-held myth that globalization keeps prices low has been shattered by decades of evidence and a multitude of economic studies.
President Trump’s continued tariff proposals have sparked criticism from some economists and politicians who seek to continue the economic globalization of the U.S. One of the main claims from this group is that restricting imports through tariffs or quotas will lead to increased prices. However, this argument is a repeat of the flawed reasoning that fueled the unchecked expansion of globalization and free trade over the past decades. The evidence is clear: neither tariffs nor the surge of imports from trade liberalization have had a significant effect on inflation, positive or negative.
Tariffs Do Not Lead to Any Substantial Inflation Growth
The myth that inflation is influenced by tariffs and imports gained steam during the global trade liberalization era. Free trade economists have argued that developed economies such as the United States and Europe would benefit from cheaper goods made in developing economies by opening up to imports and eliminating tariffs. This is exactly what the U.S. and Europe did. And in 2024, the U.S. hit a record trade deficit with the total goods trade gap reaching $1.21 trillion. Now these same economists falsely claim that increasing tariffs will lead to rising inflation rates.
Figure 1 illustrates the relationship between average tariff rates on manufactured goods and average inflation rates over the past 5 years. In the 40 largest global economies, this relationship has been flat, implying that higher tariff rates have little to no effect on inflation. The overall regression trend is (Y = 0.04842*X + 4.353), which shows that countries with a 10% higher tariff rate on manufactured goods only see 0.48% higher inflation on average.
FIGURE 1:
While this is only a correlation, it shows that countries with higher tariff rates do not suffer from notably higher inflation. Moreover, it is consistent with the findings in other major studies.
A 2023 USITC study on the economic impact of the 25% steel and 10% aluminum Section 232 tariffs found that the tariffs had minimal domestic price impacts and boosted domestic production. The report states, “From 2018 to 2021, section 232 tariffs are estimated to have increased the price of domestically produced steel by about 0.7 percent, on average, and increased the quantity of steel production by about 1.9 percent. During the same time period, section 232 tariffs are estimated to have increased the price of domestically produced aluminum by 0.9 percent, on average, and increased the quantity of domestic production by about 3.6 percent. The increases in production quantity in the steel and aluminum industries translated to an increase of about $2.25 billion in 2021 for these industries combined.” [1]
The success of effective trade policy is echoed with washing machines, where the 2018-2023 washing machine tariffs stimulated investment in domestic production and led to no long-term price increases. Washing machine prices are now below pre-tariff levels, and prices have risen less than consumer inflation.
Similarly, U.S. quotas on automobiles from Japan in the 1980s forced the Japanese automakers to invest heavily in building U.S. manufacturing centers, which countered and reversed the initial price increases and created sustained American automotive production.
Economists and Policymakers Are Finally Waking Up to Reality
The decades of evidence on imports, tariffs, and inflation are finally catching up to many economists and policymakers in government as recent forecasts now show. A December 2024 Congressional Budget Office (CBO) report estimated that a global 10% tariff would only lead to a 0.6% increase in prices. Similarly, a February 2025 study by the Federal Reserve Bank of Boston estimates that Trump’s 25% tariff on Canada and Mexico and 10% on China would only cause an inflation impact of 0.5 to 0.8%. And a 60% tariff on China and a 10% tariff on the rest of the world would only cause an inflation impact of 1.4 to 2.2%.
These results mirror the findings in CPA’s study on a global 10% tariff. We estimate a global 10% tariff would cause consumer prices to rise by about half a percent per year over an anticipated six-year adjustment period. Meanwhile the benefits include $728 billion in economic growth, 2.8 million additional jobs, and a 5.7% boost in household income (equivalent to $4,252).
The Deflationary Import Myth
Just as tariffs have little effect on causing inflation, the surge in imports over the past decades has had little impact on reducing inflation. Figure 2 shows how growing import levels are in fact associated with not lower, but higher inflation. The figure shows that there is a slightly positive relationship between annual import growth and annual inflation over the past 5 years among the largest 40 global economies. With a linear regression relationship of (Y = 0.1410*X + 4.162), this shows countries that increase imports 1% more have a 0.14% higher inflation rate on average.
FIGURE 2:
While the regression has a slightly positive correlation, overall, the curve is flat and shows that increasing imports has had little impact on inflation, either positive or negative, over the past five years. Many other economic studies on the 2000s globalization period have shown similar results.
An OECD study estimated that globalization lowered annual inflation by only 0.1% in the U.S., and by only 0.2% in the Euro area between 1996 and 2005. [2] A study in the European Economic Review found that imports from low-wage-countries reduced CPI inflation in France by only 0.02% per year from 1994 to 2014. [3]
And a study by the Bank of Canada concluded that the offshoring of production to China (which now controls 31% of the world’s manufacturing power) only reduced global inflation by 0.07% over the 1990-2006 period. [4] U.S. trade policy over the past decades has pursed miniscule benefits like this, and at what cost? According to a study by the National Bureau of Economic Research, “Our central estimates suggest net job losses of 2.0 to 2.4 million stemming from the rise in import competition from China over the period 1999 to 2011.” [5]
A European Central Bank report also concluded “that globalisation does not appear to be a major force behind the disinflationary trends of the past decades, and any headwinds stemming from globalisation were too small to be economically meaningful. This conclusion hinges on three main elements. First, the major plunge in inflation and its persistent component started in the 1980s, when globalisation was still latent, and came to a halt around the mid-1990s, when China had not yet joined the WTO. Furthermore, the fall in inflation was synchronised across goods and services and, because of their different tradability, they should not respond homogeneously to cross-border integration.” [6]
Overreliance on Imports Makes Inflation More Volatile
Some economic evidence even points to possibly higher inflation caused by an overreliance on imports and a poor trade balance. Figure 3 shows how higher import shares of total trade are linked to higher inflation across the world. Among the largest 40 global economies, there is a positive relationship between how much imports account for a country’s total trade and annual inflation over the past 5 years. With a linear regression relationship of (Y = 0.1882*X – 4.788), this shows that countries with a 10% higher import share have a 1.88% higher inflation rate on average.
FIGURE 3:
This certainly dismisses the notion that a country should rely more on imports to lower inflation. Import supply is much more volatile. And an overreliance on imports can lead to rampant inflation during crises, as evidenced during the COVID-19 pandemic. While the correlation in this figure does not itself prove that higher import levels cause inflation, other studies have found globalization and trade integration to be inflationary.
A study by the National Bureau of Economic Research found that “While conventional wisdom suggests rising input trade restrains producer price inflation, we have demonstrated that it has no such effect in standard New Keynesian models…. Anticipated increases in trade – consistent with widespread understanding that globalization was an ongoing process of integration – lead to increased aggregate demand, which generates inflation. Further, we have also shown that neither changes in capital inflows, nor procompetitive effects of trade on markups overturn these basic forces, and they may in fact strengthen them. Overall, we are left with the conclusion that trade integration is inflationary.” [7]
Conclusion
The data is clear: neither the surge in imports nor tariffs have a meaningful impact on inflation. The long-held myth that globalization keeps prices low has been shattered by decades of evidence showing only minor inflation reduction at best. Meanwhile, rising import dependence has uprooted millions of jobs and often only made inflation more volatile.
Conversely, tariffs have proven to be an effective tool for boosting domestic production with little to no inflationary effect. Production and supply are dynamic, not static. Tariffs stimulate domestic investments and increase American manufacturing capacity. Even all the latest government studies now confirm what should have been obvious all along—strategic trade policy strengthens the economy without driving up consumer costs.
It’s time to abandon the outdated dogma of unregulated free trade and focus on policies that rebuild American industry, create jobs, and ensure long-term economic resilience.
[1] Economic Impact of Section 232 and 301 Tariffs on U.S. Industries. (2023). United States International Trade Commission. https://www.usitc.gov/publications/332/pub5405.pdf
[2] Pain, N., I. Koske and M. Sollie (2006), “Globalisation and Inflation in the OECD Economies”, OECD Economics Department Working Papers, No. 524, OECD Publishing, Paris, https://doi.org/10.1787/377011785643.
[3] Carluccio, J., Gautier, E., & Guilloux-Nefussi, S. (2023). Dissecting the impact of imports from low-wage countries on inflation. European Economic Review. https://www.sciencedirect.com/science/article/abs/pii/S0014292123002416.
[4] Côté, D., & De Resende, C. (2008). Globalization and Inflation: The Role of China. Bank of Canada. https://www.bankofcanada.ca/wp-content/uploads/2010/02/wp08-35.pdf
[5] Daron Acemoglu, David Autor, David Dorn, Gordon H. Hanson, Brendan Price. “Import Competition and the Great U.S. Employment Sag of the 2000s”. National Bureau of Economic Research. August 2014. https://www.nber.org/system/files/working_papers/w20395/w20395.pdf
[6] Attinasi, M. G., & Balatti, M. (2021, June 22). Globalisation and its implications for inflation in advanced economies. European Central Bank. https://www.ecb.europa.eu/press/economic-bulletin/articles/2021/html/ecb.ebart202104_01~ae13f7fe4c.en.html
[7] Comin, D., & Johnson, R. (2021). OFFSHORING AND INFLATION. NATIONAL BUREAU OF ECONOMIC RESEARCH. https://www.nber.org/system/files/working_papers/w27957/w27957.pdf
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.
Tariffs and Trade Have Little Impact on Inflation
KEY POINTS
President Trump’s continued tariff proposals have sparked criticism from some economists and politicians who seek to continue the economic globalization of the U.S. One of the main claims from this group is that restricting imports through tariffs or quotas will lead to increased prices. However, this argument is a repeat of the flawed reasoning that fueled the unchecked expansion of globalization and free trade over the past decades. The evidence is clear: neither tariffs nor the surge of imports from trade liberalization have had a significant effect on inflation, positive or negative.
Tariffs Do Not Lead to Any Substantial Inflation Growth
The myth that inflation is influenced by tariffs and imports gained steam during the global trade liberalization era. Free trade economists have argued that developed economies such as the United States and Europe would benefit from cheaper goods made in developing economies by opening up to imports and eliminating tariffs. This is exactly what the U.S. and Europe did. And in 2024, the U.S. hit a record trade deficit with the total goods trade gap reaching $1.21 trillion. Now these same economists falsely claim that increasing tariffs will lead to rising inflation rates.
Figure 1 illustrates the relationship between average tariff rates on manufactured goods and average inflation rates over the past 5 years. In the 40 largest global economies, this relationship has been flat, implying that higher tariff rates have little to no effect on inflation. The overall regression trend is (Y = 0.04842*X + 4.353), which shows that countries with a 10% higher tariff rate on manufactured goods only see 0.48% higher inflation on average.
FIGURE 1:
While this is only a correlation, it shows that countries with higher tariff rates do not suffer from notably higher inflation. Moreover, it is consistent with the findings in other major studies.
A 2023 USITC study on the economic impact of the 25% steel and 10% aluminum Section 232 tariffs found that the tariffs had minimal domestic price impacts and boosted domestic production. The report states, “From 2018 to 2021, section 232 tariffs are estimated to have increased the price of domestically produced steel by about 0.7 percent, on average, and increased the quantity of steel production by about 1.9 percent. During the same time period, section 232 tariffs are estimated to have increased the price of domestically produced aluminum by 0.9 percent, on average, and increased the quantity of domestic production by about 3.6 percent. The increases in production quantity in the steel and aluminum industries translated to an increase of about $2.25 billion in 2021 for these industries combined.” [1]
The success of effective trade policy is echoed with washing machines, where the 2018-2023 washing machine tariffs stimulated investment in domestic production and led to no long-term price increases. Washing machine prices are now below pre-tariff levels, and prices have risen less than consumer inflation.
Similarly, U.S. quotas on automobiles from Japan in the 1980s forced the Japanese automakers to invest heavily in building U.S. manufacturing centers, which countered and reversed the initial price increases and created sustained American automotive production.
Economists and Policymakers Are Finally Waking Up to Reality
The decades of evidence on imports, tariffs, and inflation are finally catching up to many economists and policymakers in government as recent forecasts now show. A December 2024 Congressional Budget Office (CBO) report estimated that a global 10% tariff would only lead to a 0.6% increase in prices. Similarly, a February 2025 study by the Federal Reserve Bank of Boston estimates that Trump’s 25% tariff on Canada and Mexico and 10% on China would only cause an inflation impact of 0.5 to 0.8%. And a 60% tariff on China and a 10% tariff on the rest of the world would only cause an inflation impact of 1.4 to 2.2%.
These results mirror the findings in CPA’s study on a global 10% tariff. We estimate a global 10% tariff would cause consumer prices to rise by about half a percent per year over an anticipated six-year adjustment period. Meanwhile the benefits include $728 billion in economic growth, 2.8 million additional jobs, and a 5.7% boost in household income (equivalent to $4,252).
The Deflationary Import Myth
Just as tariffs have little effect on causing inflation, the surge in imports over the past decades has had little impact on reducing inflation. Figure 2 shows how growing import levels are in fact associated with not lower, but higher inflation. The figure shows that there is a slightly positive relationship between annual import growth and annual inflation over the past 5 years among the largest 40 global economies. With a linear regression relationship of (Y = 0.1410*X + 4.162), this shows countries that increase imports 1% more have a 0.14% higher inflation rate on average.
FIGURE 2:
While the regression has a slightly positive correlation, overall, the curve is flat and shows that increasing imports has had little impact on inflation, either positive or negative, over the past five years. Many other economic studies on the 2000s globalization period have shown similar results.
An OECD study estimated that globalization lowered annual inflation by only 0.1% in the U.S., and by only 0.2% in the Euro area between 1996 and 2005. [2] A study in the European Economic Review found that imports from low-wage-countries reduced CPI inflation in France by only 0.02% per year from 1994 to 2014. [3]
And a study by the Bank of Canada concluded that the offshoring of production to China (which now controls 31% of the world’s manufacturing power) only reduced global inflation by 0.07% over the 1990-2006 period. [4] U.S. trade policy over the past decades has pursed miniscule benefits like this, and at what cost? According to a study by the National Bureau of Economic Research, “Our central estimates suggest net job losses of 2.0 to 2.4 million stemming from the rise in import competition from China over the period 1999 to 2011.” [5]
A European Central Bank report also concluded “that globalisation does not appear to be a major force behind the disinflationary trends of the past decades, and any headwinds stemming from globalisation were too small to be economically meaningful. This conclusion hinges on three main elements. First, the major plunge in inflation and its persistent component started in the 1980s, when globalisation was still latent, and came to a halt around the mid-1990s, when China had not yet joined the WTO. Furthermore, the fall in inflation was synchronised across goods and services and, because of their different tradability, they should not respond homogeneously to cross-border integration.” [6]
Overreliance on Imports Makes Inflation More Volatile
Some economic evidence even points to possibly higher inflation caused by an overreliance on imports and a poor trade balance. Figure 3 shows how higher import shares of total trade are linked to higher inflation across the world. Among the largest 40 global economies, there is a positive relationship between how much imports account for a country’s total trade and annual inflation over the past 5 years. With a linear regression relationship of (Y = 0.1882*X – 4.788), this shows that countries with a 10% higher import share have a 1.88% higher inflation rate on average.
FIGURE 3:
This certainly dismisses the notion that a country should rely more on imports to lower inflation. Import supply is much more volatile. And an overreliance on imports can lead to rampant inflation during crises, as evidenced during the COVID-19 pandemic. While the correlation in this figure does not itself prove that higher import levels cause inflation, other studies have found globalization and trade integration to be inflationary.
A study by the National Bureau of Economic Research found that “While conventional wisdom suggests rising input trade restrains producer price inflation, we have demonstrated that it has no such effect in standard New Keynesian models…. Anticipated increases in trade – consistent with widespread understanding that globalization was an ongoing process of integration – lead to increased aggregate demand, which generates inflation. Further, we have also shown that neither changes in capital inflows, nor procompetitive effects of trade on markups overturn these basic forces, and they may in fact strengthen them. Overall, we are left with the conclusion that trade integration is inflationary.” [7]
Conclusion
The data is clear: neither the surge in imports nor tariffs have a meaningful impact on inflation. The long-held myth that globalization keeps prices low has been shattered by decades of evidence showing only minor inflation reduction at best. Meanwhile, rising import dependence has uprooted millions of jobs and often only made inflation more volatile.
Conversely, tariffs have proven to be an effective tool for boosting domestic production with little to no inflationary effect. Production and supply are dynamic, not static. Tariffs stimulate domestic investments and increase American manufacturing capacity. Even all the latest government studies now confirm what should have been obvious all along—strategic trade policy strengthens the economy without driving up consumer costs.
It’s time to abandon the outdated dogma of unregulated free trade and focus on policies that rebuild American industry, create jobs, and ensure long-term economic resilience.
[1] Economic Impact of Section 232 and 301 Tariffs on U.S. Industries. (2023). United States International Trade Commission. https://www.usitc.gov/publications/332/pub5405.pdf
[2] Pain, N., I. Koske and M. Sollie (2006), “Globalisation and Inflation in the OECD Economies”, OECD Economics Department Working Papers, No. 524, OECD Publishing, Paris, https://doi.org/10.1787/377011785643.
[3] Carluccio, J., Gautier, E., & Guilloux-Nefussi, S. (2023). Dissecting the impact of imports from low-wage countries on inflation. European Economic Review. https://www.sciencedirect.com/science/article/abs/pii/S0014292123002416.
[4] Côté, D., & De Resende, C. (2008). Globalization and Inflation: The Role of China. Bank of Canada. https://www.bankofcanada.ca/wp-content/uploads/2010/02/wp08-35.pdf
[5] Daron Acemoglu, David Autor, David Dorn, Gordon H. Hanson, Brendan Price. “Import Competition and the Great U.S. Employment Sag of the 2000s”. National Bureau of Economic Research. August 2014. https://www.nber.org/system/files/working_papers/w20395/w20395.pdf
[6] Attinasi, M. G., & Balatti, M. (2021, June 22). Globalisation and its implications for inflation in advanced economies. European Central Bank. https://www.ecb.europa.eu/press/economic-bulletin/articles/2021/html/ecb.ebart202104_01~ae13f7fe4c.en.html
[7] Comin, D., & Johnson, R. (2021). OFFSHORING AND INFLATION. NATIONAL BUREAU OF ECONOMIC RESEARCH. https://www.nber.org/system/files/working_papers/w27957/w27957.pdf
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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