The US imposed substantial tariffs on China during President Trump’s first term. Those tariffs never resulted in a material inflation spike, which is making markets skeptical there’ll be an inflation spike now. That makes little sense, because: (i) tariffs have been put on many more countries now, so the effective tariff rate is up far more than in 2018; and (ii) the Dollar has fallen sharply in recent months, which means it’s adding to the tariff inflation impulse as opposed to muting it as in 2018. Regardless of these differences, markets had a dovish take on yesterday’s CPI reading. That’s wrong. Inflation is ... (full story)