Tariffs increase consumer prices, impacting inflation significantly

Economist Claudia Sahm discussed inflation and tariffs in a recent conversation. She noted that the COVID-19 pandemic played a big role in increasing inflation in 2022. The pandemic caused significant disruptions in global supply chains and changed consumer behavior. This led to a surge in demand when the economy reopened, putting pressure on prices. Sahm explained that government stimulus helped families during the pandemic. However, the support may have been larger than necessary, contributing to ongoing inflation. She emphasized that while some inflation was expected due to the pandemic's impact, better policy decisions could have lessened its effects. When asked about tariffs, Sahm said they can be inflationary. If companies cannot source goods from other countries to avoid tariffs, they often pass the extra costs onto consumers. This can lead to higher prices for affected goods. While some consumers are aware of how tariffs can impact prices, opinions vary on whether the economic benefits justify these costs. Sahm's insights shed light on the complex relationship between tariffs and inflation, highlighting the challenges both consumers and policymakers face amid rising prices.