Dan Pickering

Yeah, you know, at the time, it feels like now 100 years ago.

But what we got right at the time was that the volatility associated with these type of rapid swings in our trade policy was going to have very significant economic consequences.

And these are, in fact, the most inflationary policies that have been pursued in our lifetimes.

And that is what is showing up on the data.

We've all kind of like lived through it.

You see tariff pauses go into place.

You see new rate announcements.

You see a commercial that the president doesn't like in Canada and the response is new punitive tariff rates.

And part of what is so important for economic analysts is that

It's not just that the level of the tariffs is so much higher now than it was before the second Trump term.

It is also that it is incredibly difficult for businesses or to be able to plan or other countries to be able to understand what U.S.

trade policy is going to look like when these swings are so dramatic and they're happening with such frequency.

we had projected at the time that tariff rates, should they stay in place permanently at the levels that were effectuated on Liberation Day, would likely lead to price increases in the 2% to 3% range over the course of a one-year period.

We've actually seen price increases that have been about half that.

And so the question is, what is driving the difference between those two, the estimates and what you've seen in practice?

One big piece of it, it turns out, is what we've already been talking about, Kai, which is that

You've seen much lower tariff rates in part because of these pauses that have been instituted and the various negotiations.

But essentially, our effective tariff rate right now is about half of what it was in April of last year.

And another piece of it is we now know that pass-through of tariff rates to prices appears to be different in different sectors of the economy, and we're getting in real time more information about the ways in which those prices are passing through.

But I anticipate that as these tariff regimes start to take hold over a longer horizon, you're going to see more and more pass-through to prices and more and more adjustment by importers and firms alike.