Fed agenda faulted, Kamala's claims about tariffs left 'in tatters' by new study

The common claims about tariffs, used liberally by President Donald Trump to bring about a more fair international trading platform for Americans, have been exploded by a new study that assesses the impact of those programs over 150 years.

In fact, the claims by Kamala Harris during her failed 2024 presidential campaign, are "in tatters" and the Fed has been shown to be doing exactly the wrong thing.

"The study removes the most potent intellectual weapon from the free-trade arsenal: the claim that tariffs inevitably raise consumer prices. For generations, this assertion ended policy debates before they could begin. Policymakers considering tariffs faced the accusation that they were imposing a regressive tax on consumers. Kamala Harris, in her failed bid for the presidency last year, repeatedly described Trump's tariff proposals as a national sales tax that would increase consumer prices. Now that idea lies in tatters," explained a report from Breitbart.

"With the consumer price argument dismantled, the debate over tariffs can proceed on grounds better rooted in economic history and national purpose. Policymakers can weigh the benefits of protecting domestic industries, rebalancing trade relationships, and rebuilding manufacturing capacity against the effects on economic activity and employment. They can consider whether tariffs might encourage productive investment and industrial development, questions that have been largely off-limits in mainstream economic discourse. The paper's findings also call into question the Fed's response to tariffs. If the main effects are lower inflation and higher lower employment, monetary theory would suggest that the Fed should cut interest rates when tariffs are imposed. Instead, the Fed this year took the opposite course, holding interest rates steady and only cutting hesitantly—moves that now look like a major policy mistake."

The assessment, from the Federal Reserve Bank of San Francisco considered the "150 years of tariff policy in the U.S. and abroad."

"A careful review of the major changes in U.S. tariff policy since 1870 shows no systematic relation between the state of the cycle and the direction of the tariff changes, as partisan differences on the effects and desirability of tariffs led to opposite policy responses to similar economic conditions. Exploiting this quasi-random nature of tariff variations, we find that a tariff hike raises unemployment (lowers economic activity) and lowers inflation. Using only tariff changes driven by long-run considerations—a traditional narrative identification—gives similar results. We also obtain similar results if we restrict the sample to the modern post World War II period or if we use independent variation from other countries (France and the UK). These findings point towards tariff shocks acting through an aggregate demand channel."

The study found "when countries raise tariffs, prices actually fall, not rise."

Authors Regis Barnichon and Aayush Singh found, "We find that a tariff hike raises unemployment and lowers inflation. … This goes against the predictions of standard models, whereby CPI inflation should go up in response to higher tariffs."

The Breitbart report noted the conclusion was released at a "politically charged moment" since the Trump administration has imposed tariff increases averaging 18% on U.S. imports in 2025."

That resulted in legacy economists claiming that is inflationary.

Federal Reserve officials have joined, claiming they don't want to cut interest rates because they expect tariffs to push up prices.

That agenda, the report said, reveals those are "theoretical foundations" that are "shaky" and are not "backed by evidence," the report said.

Political parties long have held opposing views, with Republicans favoring tariffs and Democrats opposing them.

The authors found that "since recessions did not favor one party over another, there was no general relation between the direction of tariff changes and the state of the economy."

They then looked at a long list of tariff actions, from the McKinley Tariff of 1890 to President Trump's recent actions.

Overall, "A roughly 4 percentage point increase in average tariffs lowered inflation by about 2 percentage points while raising unemployment by about 1 percentage point, they found," the report said.

That "contradicts" standard economic assumptions, the report said.

The study found, "We provide suggestive evidence that an aggregate demand channel can be at play, but an important avenue for future research is to understand the theoretical reasons for these surprising yet robust findings, which are central to the appropriate monetary response to tariff shocks."

The report commented, "What emerges is a picture of tariffs far different from what opponents have typically portrayed. Rather than a crude tool that raises prices and harms consumers, tariffs appear to operate through sophisticated demand and supply mechanisms that reshape economic activity in ways economists are only beginning to understand."