Inflation Is a Mind Game, Too

Treasury Secretary Scott Bessent says tariffs don’t cause inflation. “Tariffs are a one-time price adjustment,” he said Sunday on Meet the Press, four days after Donald Trump announced he was pushing import duties to the highest levels in a century. Bessent added that there’s a big difference between that and “endemic inflation within the system.” He technically has a point, but it’s pure semantics.

In the eyes of economists, inflation is a sustained increase in overall prices of goods and services. It doesn’t count if iPhone prices go up by 10% on a one-time basis, because the higher prices might prompt consumers to spend less on, say, restaurants and haircuts, driving those prices down and plausibly leaving the general price level lower overall. Even if tariffs raise the price of everything all at once, they needn’t be followed by further big increases in the price level. Fine, that’s all correct.