On Friday, Breitbart posted an article about what the historical data says about the impact of tariffs.

The article reports:

A sweeping new analysis of tariff policy spanning 150 years suggests that the economic establishment may have fundamentally misunderstood how tariffs affect prices and employment, a finding with profound implications for understanding President Donald Trump’s trade policy and the proper response by the Federal Reserve.

Researchers at the Federal Reserve Bank of San Francisco examined major tariff changes from 1870 through 2020 across the United States, the United Kingdom, and France. Their conclusion challenges the conventional wisdom that dominated economic policy debates in recent years: when countries raise tariffs, prices actually fall, not rise.

The article concludes:

More importantly, 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.

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.

Unfortunately, in recent years, cutting interest rates has more to do with politics than economic data. When someone the fed likes is President, interest rates move lower quickly and stay low if at all possible (however, if inflation becomes too high and too obvious, they will raise them). When someone the deep state dislikes is President, interest rates tend to be lowered very slowly if at all.