The Mystery Deflation in the Fed’s Tariff Chart
\n\nYesterday we explained that the New York Fed’s new tariff paper doesn’t really show that tariffs pushed inflation higher.
\n\nThe paper does a much better job than earlier essays by the same set of economists at showing that a portion of the tariffs were passed through to consumers. But it doesn’t really show that this raised the general price level for consumer goods—much less the overall basket of consumer goods and services—rather than moving some prices higher and possibly pushing some prices lower.
\n\nWhat the Fed paper did was measure how much faster prices rose for goods more exposed to tariffs, directly or through their inputs. It then assumes that goods with no tariff exposure were unaffected—or at least goods the Fed economists think had no exposure—and treats whatever happened to them as if it would have happened anyway. That is the “counterfactual” non-tariff scenario they use to determine the effect of tariffs on goods prices.
\n\nIn other words, they don’t demonstrate that tariffed goods prices would have moved like the non-tariffed goods actually did. And they don’t show that non-tariffed goods prices would have behaved like they did in the absence…
Original source: https://www.breitbart.com/economy/
