The Truth about Tariffs: Busting the Inflation Myth
My wife Robin just wanted some groceries.
Simple enough.
She parked the car for fifteen minutes, and returned to find a huge scratch on the side.
Someone keyed her car.
To be clear, this isn’t just any car.
It’s a Cybertruck—Elon Musk's stainless-steel spaceship on wheels. She bought it back in 2021, before Musk became everyone's favorite villain or savior.
Someone saw it parked in a grocery lot and felt compelled to carve their hatred directly into the metal.
That's what happens when you stand out.
Nobody keys a beige minivan.
When you're polarizing, you're impossible to ignore. But the irony is: the more attention something has, the harder it is to find the truth about it.
What’s Elon Musk really thinking? What are his plans? What will happen with DOGE? Is he deserving of all of this adoration and hate? Hard to say.
Ideas work the same way.
Take tariffs, for example.
Tariffs have become the Cybertrucks of economic policy. People either love them or hate them. Even if they don’t understand what they are and how they work. (Most don’t.)
That’s why, in my latest podcast (link below), I wanted to explore the “in-between” truth about tariffs.
And like Cybertrucks, I guess my thoughts on tariffs are polarizing.
Greg Gutfield mentioned me on Fox News. Harvard professors hate me now. (I wonder if they also key Cybertrucks?)
But before I show you what I think about tariffs… I have to mention something.
We’re Headed to Austin, Texas
This weekend, my team and I are headed to Austin. By now, you should probably know why.
Yes, SXSW is happening. But my team and I are doing something I think is even better.
We’re putting on a FREE event on “Tech’s Turning Point.”
AI, quantum, biotech, crypto, and more—it’s all on the table.
Just now, we posted a special webpage with the agenda.
Click here to check it out and add it to your calendar.
The Truth About Tariffs
People love to panic about tariffs causing inflation.
They wave around the ghost of the Smoot-Hawley Tariff from the Great Depression like it’s Exhibit A proving tariffs equal economic collapse.
But let me pop this myth:
Tariffs don’t cause inflation. And no, I'm not crazy (despite what angry professors from Harvard or Stanford might tweet at me).
Here's the deal.
Inflation isn’t when just a couple of things become pricier. It’s when your entire shopping basket—eggs, shirts, Netflix subscriptions, bananas, everything—starts costing more because your money’s worth less.
Inflation means your dollars aren’t stretching as far as they used to.
Take the 1800s.
For nearly a century, 97% of America’s revenue came from tariffs. Income tax? Didn’t exist. And guess what inflation was? Basically zero. Maybe 1% a year.
The economy was booming, and tariffs funded nearly everything. So, why do people suddenly think tariffs cause inflation today?
Tariffs are taxes on imports, yes, but prices are set by supply and demand—not tariffs.
Let me give you a simple example.
Imagine fancy potato chips from Canada cost $10, and a 20% tariff pushes that to $12. Everyone panics—prices rose! Inflation!
Nope.
If I only have $100 to spend and the price of my favorite chips goes up, I either stop buying chips or I buy, say, fewer newspapers.
If everyone stops buying newspapers because they’re overspending on chips, newspapers lower their prices or go out of business.
Overall spending stays the same, and inflation doesn’t budge.
Three quick scenarios:
- We buy pricier chips, but fewer other things: Inflation unchanged.
- Manufacturers shift to the U.S. to avoid tariffs: Inflation unchanged (and more jobs here).
- We stop buying fancy chips: Prices drop again. Inflation? Still unchanged.
The only thing that actually causes inflation is printing money.
Between 2020 and 2022 alone, 40% of all money ever created in history appeared overnight.
That’s why inflation shot up afterward—not because of tariffs.
Back to tariffs today.
Still No Inflation
Unlike the infamous Smoot-Hawley blanket tariff (imagine Oprah handing out tariffs: "You get a tariff, and you get a tariff!"), today's tariffs are strategic.
Trump slapped tariffs on chips from Taiwan because we shouldn’t rely on a single foreign supplier for vital tech components—especially if that supplier might get invaded.
Now Taiwan Semiconductor is investing $100 billion in American manufacturing.
Strategic win, no inflation.
Then there’s Canada and Mexico—our friendly neighbors with weirdly huge tariffs on things like milk and butter (299% tariff on butter—really, Canada?).
Trump’s not blanketing everything with tariffs; he’s pressuring trade partners to lower theirs.
If they do, everybody wins. If they don’t, well, then we have a strategic trade chess game—but still no inflation.
In short, tariffs are about strategy, security, and fairness—not inflation.
Yes, blanket tariffs from the Great Depression era were dumb. Obviously. Today's targeted tariffs? Smart.
Listen to the whole podcast to hear why I think this.
And by the way, if you see a Cybertruck, don’t key it. Robin doesn’t care about your politics; she just likes her weird truck.
Maybe read a good book, relax, and leave cars alone.
(And yes, nobody keys Volkswagens, even though they were basically created by Hitler. Strange world we live in.)
