The Media’s War on Tariffs

Posted on by Finster Posted in Economics, Federal Reserve, Markets, Politics

Why are the financial media lobbying against tariffs?

Bloomberg reports:

Fed Paper Finds Tariffs May Raise Consumers’ Everyday Costs

Such papers would make a perfect target for Elon Musk and his merry band of federal cost cutters. You needed a study to tell you that?

It sheds light on nothing, because sidesteps the issue, pretending that the only question is what effect tariffs might have on consumer prices. Never mind what other polices usurp consumer purchasing power. Look here, not there!

Tariffs are a form of tax. All taxes do the same thing: They transfer purchasing power from the public to the government. The only difference is the route of administration. The media are being disingenuous pretending that tariffs are somehow different in any other respect.

Suppose that an income tax takes 10% of your income. Your purchasing power is reduced by 10%. Compare that with a sales tax of 10%. Your purchasing power is reduced by 10%.

The difference is that the income tax takes the dollars before you spend them. The sales tax takes them when you spend them. The latter does so by raising the price you pay.

A tariff is like a sales tax in that it also raises the price you pay. But does that somehow make it more costly to you than if the government took the money first?

The net taking is the same. You get less and pay less or you get more and pay more. But neither one is “inflationary”. Inflation is the act of taking purchasing power by diluting the value of the currency. This also is effectively a tax, but popular with politicians because it’s covert. Instead of openly taking your money, it’s devalued, the thief hiding and pointing fingers elsewhere.

A tariff only becomes “inflationary” by the device of redefining “inflation” to equal rising consumer prices. Since taking purchasing power by diluting the value of the currency is what the Fed does, it’s not hard to imagine why it might prefer a definition that diverts attention from it. But that’s no excuse for the media to play along. Unless the media happen to represent interests that benefit from inflation, like, say, the political and financial establishment.

So why might these media uniquely despise tariffs, among other forms of tax? It’s simple: The consumer will not bear the entire burden. Some of the cost will be borne by the foreign producer. And some of it by the domestic middleman, usually a US corporation.

In other words, the corporate media is not so vexed that the consumer might pay more, but that corporations might pay more.

The dent to profits could cause some of the hot air to exit stock prices, impacting Wall Street bonuses, corporate insiders’ stock options … and … because of the Fed’s evasive definition of inflation, might even prompt higher interest rates, making it easier for people to earn a decent return on their savings without being forced to buy overpriced stocks.

To the extent it’s not already clear, the exercise of discerning the agenda behind such a Fed paper and in broadcasting it to the public is left to the reader.

49 thoughts on “The Media’s War on Tariffs”

  1. Reply
    Finster says:

    If nothing else, the decline in gold prices amidst further tariff angst vindicates my dismissal of media attempts to chalk up rising gold prices to tariffs. Another self inflicted dent in media credibility.

    According to the media, tariffs made gold prices go up. Now that gold prices have gone down, a new story is required.

    The reality isn’t getting much mainstream press. Gold prices have been soaring because of the Fed’s easy money policies and the government debt binge they spawned. As any consumer that hasn’t been living in a cave knows, the dollar has been losing value. It takes more dollars to buy the same stuff, leading first to higher gold prices, and later to higher consumer prices.

    The possibility that the new administration’s exertions to cut government spending might at least temporarily reverse this loss isn’t deemed worthy of media attention. The recent strength of the dollar just happened for unrelated unimportant reasons.

  2. Reply
    llanlad2 says:

    https://www.yanisvaroufakis.eu/2025/02/21/donald-trumps-economic-masterplan-unherd/

    I just came across this. Hadn’t seen his stuff for ages.
    I know Trump in the past has said he thinks the dollar is overvalued and makes the US uncompetitive. Is this logic right? Isn’t a strong dollar, based on the US producing goods (rather than dollars!) for its own consumption better for US workers? In my mind stronger manufacturing capacity would lead to a stronger dollar. Also, I have no doubt that that Trump is threatening to remove support for Ukraine partly as a way to force the Europeans to buy US weapons rather than get them for free which also creates further demand for dollars.
    Thoughts?

    1. Reply
      Finster says:

      Good question, LL. Part of it is what exactly is meant by a “strong dollar”? Usually that means the currency is strong in terms of other currencies, but there’s no bold line of demarcation between that and strong against everything else. In other words, you can’t just selectively weaken it against one thing without weakening it against others. The only way that happens is if the other currencies are strong, not something the US has direct control over.

      So in the general sense, a weak dollar is one that’s depreciating not only against foreign currencies but against other things we might not want it to weaken against, like consumer goods and services. In short, it means rising consumer prices.

      So I’m skeptical that any policy expressly contrived to weaken the dollar is an unmitigated benefit. Basically it boils down to a strategy of making American labor more competitive by reducing real wages.

      That’s how neokeynesian stimulus always works, and only temporarily so, because workers will eventually demand higher wages to maintain their purchasing power.

      Also other countries often respond with policies to weaken their own currencies. This is why currency depreciation – inflation – tends to be an international phenomenon. Everybody joins hands and goes down together.

  4. Reply
    Mega says:

    Mega’s dispatch from England………..The parting of the ways

    After the Thermonuclear White House meeting the British (City of London gang) are in full panic mode. The British press doing its best is now telling outright lies ref Ukraine holding or beating Russian forces.

    This is now the preparation for the “Stab in the back” lie that if only US had helped a bit more Ukraine was holding its own, Russia about to collapse. This is total bulsh1t & even the dogs in the street know it. The EU is split, France has its plan, the British another, the important players are Poland & Germany.

    Poland which has a capable Army seems unwilling, for all their anti-Russian vile they seem to understand that this thing IS coming to the end & Russia is a next door…..she is a threat but also a trading partner, Germany however is unclear.

    The New German leader is WEF/Banker/City of London scumbag…..but he has a collapsing nation on his hands. If the reports are correct & America is going to take ownership of the undersea pipe lines that run between Russia & Germany then things suddenly get “Interesting”.

    A renewed flow of (Cheaper) gas (Sold for $ not Euro’s) into Germany. Its industry has a chance to recover. The British scum would NEVER dare to attack a US asset, US control of Germany, thus a split EU & NO collective action ref Ukraine.

    1. Reply
      Finster says:

      So Mike … where are the British people on all this?

      From what I see government policies usually don’t accurately reflect the attitudes of ordinary citizens … the Biden administration’s sure didn’t, with the result that Trump was elected. Not that everybody is on board with Trump either, but this kinda makes me suspect Starmer doesn’t necessarily reflect the views of the British people.

      What about others like Truss and Farage? The article suggests they’re picking up support. Can you give us any color?

      https://www.zerohedge.com/geopolitical/liz-truss-calls-elon-his-nerd-army-investigate-british-deep-state

      Brits please weigh in…

  6. Reply
    llanlad2 says:

    “So I’m skeptical that any policy expressly contrived to weaken the dollar is an unmitigated benefit. Basically it boils down to a strategy of making American labor more competitive by reducing real wages.”
    Exactly how I see it, and will not be a vote winner.
    That’s how neokeynesian stimulus always works, and only temporarily so,” because workers will eventually demand higher wages to maintain their purchasing power.”
    This latter statement I’m not so sure on. I think this is what global capitalism was predicted to achieve but has not. The trickle down theory. Have US workers maintained purchasing power since the 1990s? I’m pretty confident an hour’s labour does not get you the same bang for your buck. The reality is that many countries are using forced labour which means that labour is unemployed/has lost bargaining power in the richer countries. Tariffs could be seen as a tax on these unethical practices giving labour in the USA more pricing power.

    1. Reply
      Finster says:

      Oh I agree about the persistent loss of purchasing power. The thing is the real world doesn’t allow us to examine just one variable in isolation. (One reason I favor mechanistic analysis over statistical.) Other influences besides neokeynesian stimulus have been at work … just one being global labor arbitrage due to free trade policy. US workers have increasingly had to compete with third world workers. The latter’s wages have been rising.

      That may change. Tariffs are making daily headlines, and there has been a notable increase in high profile union actions over just the past few years. Joe Biden joined an auto workers picket line.

      The overall picture is one of long, multi-decade cycles. The inflation of the fifties and sixties didn’t really begin to spill over into wages until the seventies. The firing of the air traffic controllers marked a reversal, which has may just be beginning to resurge.

      Of course inflation hurts the working class most. It’s a wealth transfer mechanism. That means there’s someone on the receiving end, and this is why it keeps coming back. Inflation is very popular with political and financial elites. The rich have been getting richer. But that has never gone on indefinitely. If the cycle doesn’t end organically, it ends by revolution.

  7. Reply
    Mega says:

    The British Press are going full chat trying to come up with a story, ANY STORY that some how shows that Russia is failing or Ukraine is getting stronger……………meantime over 500 people crossed the channel in rubber boats this morning …….how can he fight Russia if he can’t guard the border.

    The British are getting pissed, i seen an old friend who knows a large number of business people. ALL are looking to invest OUTSIDE the UK!

  8. Reply
    llanlad2 says:

    Anecdotally I would say the British people are mostly behind the war despite Starmer’s general unpopularity. I hardly know anyone who thinks Putin will stop with Ukraine which is why most Brits are fairly interventionalist. Chamberlain’s “peace in our time” is still quoted at times.
    Whether the general public are in favour of sending in UK troops is more mixed but definitely has significant support. I have a wide range of friends with differing political persuasion and often read the below the line comments of the left and mostly right wing press. Most are very anti-Putin.
    Reform & Farage which had been doing well in the polls is definitely out of step with the UK public over Russia and is suffering slightly as a result. Consequently they recently made this statement in Parliament “We at Reform stand united with the whole of this house in support of Ukraine and all brave Ukrainians … the issue is that Putin is a vile dictator. We all know that. And my leader has also confirmed that it is Putin that is the aggressor in this war.”

  9. Reply
    llanlad2 says:

    Just to add some extra interesting info. I have a good friend who has recently come back from visiting her family in Russia near Archangel. I was interested to know how things were and how they’ve changed over the years. She came to the UK over 20 years ago.
    She said life had improved beyond all recognition. The town was thriving, healthcare was significantly better than the UK, no one mentioned inflation being a particular problem, the 3 theatres were booked out every night, the streets and night life were busy. In short she said the Russians there had never had it so good. So much for economic sanctions!!!! This narrative is so different to the narrative we hear in the UK.
    She did also say…
    There is no YouTube, Instagram, BBC or access to pretty much any foreign news. The people knew about the war, believed Ukraine instigated it but it didn’t seem to play a big role in their lives. At the same time she said people still desired to send their kids abroad because they didn’t believe her when she told them life was no better in the UK! The RoW still thinks Britain is Great. Funny!

  10. Reply
    llanlad2 says:

    Finally a third bit of anecdotal news from someone I know well and a bit more dubious but I know has a lot of contacts in Syria ….
    Israel is quite likely to take control of Damascus in the coming days and many locals both Muslim and especially Christians would welcome this development to the potentially more extreme alternative.
    You heard it hear first!

    1. Reply
      Finster says:

      Thanks, LL … among other things, the degree of public support for a policy is an indicator of how likely it may be to change with the next election…
      Appreciate the color too. I’m a fan of British television but have no idea how representative it is. Especially if American television is any indication…

  12. Reply
    Finster says:

    For the record, my defense of tariffs is a general one, and does not extend to changing them weekly, daily, hourly, etcetera as a dealmaking strategy. No opinion there … my analysis is purely economic.

  13. Reply
    llanlad2 says:

    You’re welcome. I don’t forsee support changing for Ukraine soon. The media here & everywhere I guess is a mouthpiece of someone so definitely to be taken with a pinch of salt. It’s very difficult to know what is true. For example, a documentary was commissioned by BBC Current Affairs and This World for BBC Two and BBC iPlayer. The film follows the lives of four young people living in the Gaza war. BBC pulled the film from its iPlayer after it was reported that the film’s narrator was the son of a Hamas official!!! I’m sure the BBC were acting in good faith but it just goes to show how everyone everywhere is manipulating stories.

    For the record, I’m with you on tarriffs but the UK is even more beholden to the financial elites than in the US.
    It will be interesting what happens in Ukraine now. Quite a dramatic development with Vance saying that a mineral deal counts as a security deal.

    1. Reply
      Finster says:

      FWIW the British television I watch is mostly drama and comedy … things like Doc Martin, William & Mary, Last of the Summer Wine, Fawlty Towers … obviously fiction, but art imitates life and all that. Hints at what life may really be like in different places and times. Like American television reflects its culture … sometimes pretty accurately but sometimes not so much. In my corner of the country Raising Hope is about as close as it gets;-)

      That was an interesting peek into Russia, too. Some folks here might find it hard to imagine life without social media like YouTube & Instagram, but it sounds pretty good to me! And I’m glad if sanctions haven’t much dampened life there. It hasn’t made things better here. For a while it seemed like hardly a day went by without some new escalation from the Biden regime, and to finally have leadership talking about winding down the war instead of ramping it up is a breath of fresh air. Most people I personally know either oppose the war or just don’t care, and probably more the latter. Even aside from the loss of life, expending huge amounts of resources to break things is a double subtraction from the world economy, and no one knows what they might have without it.

      Who knows what tariffs we’ll finally end up with, but 25% on Canada and Mexico seems out of line. They’re said to be helping out with the border. And targeted tariffs should only be used for exceptional situations; government micromanaging business isn’t good economics. The 10% across the board Trump floated earlier made more sense to me.

      Broad, consistent and modest tariffs can be economically beneficial. Lumpy, jumpy and large tariffs have damage potential more than imaginary.

    2. Reply
      Finster says:

      Most American media is no better. I opened this post with a Bloomberg blurb. Propaganda. Another one just now is a hit piece claiming TSec Bessent is failing because treasury yields are still high. Never mind they’re lower than when this administration took office.

  14. Reply
    Mega says:

    Wow, the blows are coming in thick & fast!
    British press reporting Canada have asked the King to give them Nuclear weapons to protect them from America!

    JD has just said the UK s just some Ramdon nation that’s not fought a war in 3 years!

    Meantime, Russia has 14 divisions under training, lead by battle trained leaders.
    Mike

    1. Reply
      Finster says:

      War between the US and Canada was supposed to be so far fetched as to be joke. Ever see the movie Canadian Bacon? Don’t know what they’re thinking. If there’s been a military threat, I haven’t heard of it. I’m not a fan of 25% tariffs but a nuclear response seems a bit extreme.

      1. Reply
        Finster says:

        FWIW I’m not any more a fan of 25% tariffs specifically to induce Canada and Mexico to stop the flow of fentanyl. Less. Fentanyl morbidity and mortality is a joint responsibility of the producer, the distributor, the dealer, and the consumer. Lastly the mostly. It’s not a border issue per se since it can be made anywhere and moved intranationally as well as internationally. Trudeau insists Canada is trying to do its part.

        Trump wanted Canada and Mexico to cooperate on illegal immigration and as far as I know they are. He should say thank you.

        Unless there is some secret benefit to be revealed later, it’s over the top. The capricious use of tariffs to bludgeon trading partners can do economic damage and that will be used to impugn any use of tariffs, including the constructive and legitimate. It will just tick people off.

  19. Reply
    Mega says:

    digging in!
    Britain’s peace plans for Ukraine will not be “derailed” by Donald Trump’s decision to suspend all military aid, the Deputy Prime Minister has insisted.

    The White House announced the decision late on Monday evening after Mr Trump criticised Volodymyr Zelensky, the Ukrainian president, for saying the end of the war was “very, very far away”.

    Mr Trump’s decision threatens to widen the gap with European nations, who have been scrambling to boost defence spending amid fears the US could abandon Kyiv.

    Angela Rayner said the Prime Minister would not be “derailed by announcements” and said he remained “laser focused on getting peace”.

    “He will continue that dialogue with our oldest and strongest ally the US and our European partners and Ukraine,” she said.

    It is not clear exactly how long Ukraine will be able to continue fighting effectively without US military support, though some analysts have suggested the summer.

    It came as Ursula von der Leyen, president of the European Commission, set out the EU’s €800bn plan to boost defence spending, declaring “we are in an era of rearmament”.

  21. Reply
    Finster says:

    Well stocks are down hard, and the media are once again blaming it on US tariffs. This time I’ll go along with it. Not that Europe’s apparent determination to war with Russia isn’t having an effect, but that may be more about boosting gold.

    So called “emerging markets” stocks are the notable exception to today’s stock rout. EMs playing safe haven is unusual, but with the so called “developed” world going nuts, maybe not so far fetched.

  23. Reply
    Mega says:

    Breaking!
    USA & Ukraine to sign Rare earths rights this evening.
    BIG WIN FOR TRUMP, I expect Starmer to be asked to resign…
    MIke

  24. Reply
    Mega says:

    The British “Blinked”

    7:41PM
    Starmer spoke to Zelensky before announcement
    Sir Keir Starmer spoke to Volodymyr Zelensky before he announced that Ukraine was ready to return to the negotiating table.

    The Prime Minister’s deputy spokesman said the call was made ahead of the Ukrainian leader telling Donald Trump that he was ready “to make things right” and called for a “truce” in the sea and the sky.

    The spokesman added: “We remain absolutely committed to securing a lasting peace in Ukraine. We’re engaging with key allies in support of this effort. It’s the right thing to do, and is in our interest to do, and our immediate focus remains putting Ukraine in the position of strength and bringing the US and Ukraine together for the benefits of our collective security.”

    Asked whether anyone from the Government spoke to JD Vance following his apparent criticism of the UK-French peace proposal for Ukraine, the spokesman decline to share details on “private conversations”.

  25. Reply
    Finster says:

    I had intended to give a summary of President Trump’s address to Congress, but there’s much too much to cover it fairly here. The main highlights were illegal immigration, downsizing government, tariffs, and the Ukraine War.

    More on the economic side of things. he reiterated proposals to untax tips, overtime, and Social Security benefits. Oddly, he also threw in interest payments on car loans, apparently intended to help the auto industry. That gets into government economic micromanagement, playing favorites, would duplicate already aggressive support via tariffs, and perhaps even worse, would mean the thrifty will further subsidize debtors. Beware the prospect of already pricey cars and trucks getting much pricier.

    It’s also not hard to imagine the invention of creative ways to transmogrify other forms of income into tips. IRS attempts to limit this will further complicate taxes.

    I don’t like paying taxes any more than the next guy, but a bevy of tax breaks and tax cuts seems less than timely given the state of federal finances. Simplifying the tax code could go a long way towards helping taxpayers without doing further violence to the nation’s dire balance sheet.

    A few such exceptions aside, Trump largely laid out a positive agenda for peace and prosperity. In contrast to the behavior of her party in the chamber, the young senator delivering the opposition response earns kudos for doing so rationally, pleasantly and without acrimony.

    1. Reply
      Finster says:

      It’s possible that I blinked and missed it. But I don’t recall hearing about making the US the crypto capital of the world. If this notion has fallen off Trump’s short list of priorities, good riddance. Freedom to own and trade crypto is consistent with free markets, but active promotion would be just another instance of government meddling, hardly consistent with shrinking the weight of the federal leviathan in the economy.

  27. Reply
    Mega says:

    OK
    Starmer is now trying to claim credit for a “break though” this morning. Trump is hitting out of the park & all the DNC can do is wear pink.
    THe French prez is to talk to the French people tonight (7 pm GMT), he had a screaming row with Starmer last night.

    Lets see what the next exciting chapter brings ………
    Mike

    1. Reply
      Finster says:

      DNC has been commuting slow suicide for decades. They’re alienating all their best people. Elon Musk, Tusli Gabbard, Robert Kennedy … all recent defectors. Less recently, Ronald Reagan was once a card-carrying Democrat, and so was one Donald Trump.

  30. Reply
    llanlad2 says:

    Thanks Finster for the update on the US.
    It’s surprising to hear that most US folks are in the “don’t care” camp. It just goes to show that most “news” rarely conveys the actual sentiments of the populace. They just record a member of the public who had the viewpoint they want to portray and pass it off as consensus. Do you believe taxes can be cut and inflation brought to heal? If not is the agenda doomed to fail?

    1. Reply
      Finster says:

      Well either are opposed or don’t much care, so that covers two categories, and with the caveat that it’s among people I know personally. That has the sharp limitation of a small sample size, if the advantage of having no media filter. For a little more color, see this.

      As I commented a couple replies back, I’m skeptical about the prospects of doing both tax cuts and quelling inflation. From 35,000 feet, there are only two ways to fund government spending: you can transfer the public’s purchasing power to the government forthrightly by sending them a tax bill, or you can do it behind the curtain via debasing the currency, that is, inflation. You could make the point that there’s a third way, borrowing, but that assumes the money is eventually repaid. That doesn’t seem to happen, leaving just the original two ways.

      So without spending cuts, tax cuts equal more inflation.

      Early indications are the new administration is making much greater efforts to cut spending than I had anticipated. That’s encouraging after years where there wasn’t even talk about restraint, let alone action. But there’s only so much that can be cut without dipping into the very difficult area of so called entitlements.

      There’s room for improvement in defense spending, especially if Trump makes any progress on his proposal for America, Russia and China to do it together, and to curtail foreign military adventures and promote peace.

      Tariffs are of course a form of tax and will raise revenue, but at this point we don’t have much sense of how much increases in tariffs will offset cuts elsewhere.

      The big kahuna is the matter of the preexisting debt. Much of this debt was borrowed during the years of ultralow rates, on the rationalization that only the carrying costs really matter. The flaw in that ointment is that it doesn’t take into account that interest rates aren’t going to remain ultralow forever. Now they’re not and the debt is still there, with the interest on it being paid by still more borrowing,

      That’s a debt spiral and a tough nut to crack.

  31. Reply
    Mega says:

    Mega’s dispatch from England:- Reasons to be cheerful

    I thought i take a break from the DOOM side of what is happening over here. The Net Zero bush1t carries on. The West attempt to force the rest of the World to stay poor so some fat white European can swan around in his/her electro wet dream machine has gone FLAT!

    The West is unable to afford the Hydrocarbons from Russia etc, those Hydrocarbons are heading EAST. Many an Asian or African can look forward to having a lovely V8 outside their home very soon….using the wealth that would have gone to “Feed” said fat white European.
    Many are still swaging around in their 5/10/15/2 year old BMWs, but very soon their nations will be unable import the fuel required to run it.

    So, please allow me to interduce you to its replacement…….
    https://www.youtube.com/watch?v=K1PvJBtRaCY

  32. Reply
    Mega says:

    30 years ago i was running around in a “Fast Ford”.
    it was call an RS1800………a ford Fiesta…..with…….130bhp!
    Running a Janspeed exhaust + high grade fuel ran that up to 135 ish!

    My fellow motorists were running around in ex sale rep cars, mostly Vauxhall (GM) Vectra. This was like a Saturn with a 1.8 engine, 85-90 bhp. Typical over weight GM mush, long gearing for freeway runs, high profile tyres with low grip, crap brakes etc……..you get the picture.

    Driving my RS1800 was like flying an F15 over Syria in 1979,……….. fish in a barrel.

    Then after the mid 2000’s i found that the flotsam started to get retooled with hotter kit. I did the same, but as time went on i found myself in an “arms race” with assholes whom could get cheap money to buy said cars.

    Worse still in 2011 BMW sold most of its imported 1 series to “Mobility”. Mobility is a government vote buying scam where Mega’s Taxes are spent allowing “Disabled” people to get a NEW car for F**k all!
    All they have to do is show that they have relative or “Friend” & Bob’s your uncle!

    At its Hight Mobility had over 1 million cars on its books, recent cuts have dropped the number towards 400 k, but thats still too much.

  33. Reply
    Mega says:

    things came to ahead in the 2010’s.
    Even running a 1.8 Turbo 20 valve running 210-215 bhp was fast becoming not enough. I just started my new job in Manchester meaning a very tiring 48 mile each way trip. I was too tired to enjoy my local roads.

    With regret i down sized to a 1 litre 3 pot Fiesta eco turbo making 140 bhp, but crap brakes, crap lights & long gear ratio’s …shame as the rest of the car is very good.

    I asked myself what level of BHP is required to return to 1990’s supremacy?……t was a frighteningly large amount.

    The answer is not me going quicker, its them going slower!
    Thus the Event of resent events means i can see a time when the Flotsam will be forced to decamp to low BHP small EV’s………………
    Oh Joy

  35. Reply
    Mega says:

    I just awoke from an afternoon sleep………………..the headlines are so funny that i can’t stop laughing…………must walk the dog

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