President Donald Trump Just Proclaimed, "Tariffs Don't Cause Inflation, They Cause Wealth," but Data From Federal Reserve Economists Show Otherwise

President Donald Trump recently claimed that tariffs do not cause inflation, but rather generate wealth. However, data from the New York Federal Reserve economists contradicts this assertion. In fact, their reports indicate that Trump's tariffs are contributing to inflated consumer prices.

During his campaign rally in Montana, Trump stated, "We don't have inflation, and tariffs don't cause inflation. You know what they cause? Wealth." Despite his claim, New York Federal Reserve economists have found evidence that tariffs indeed do cause inflation. Their analysis reveals that each percentage point increase in average tariffs results in a quarter-percentage-point rise in consumer goods prices after one year.

The economists estimate that Trump's tariffs have added 2.9 percentage points to goods price inflation by February 2026. This means that without these tariffs, goods prices would have modestly declined. In addition, tariffs have negatively impacted certain public companies, leading to employment, labor productivity, sales, and profit declines over the past few years.

While President Trump has argued that tariffs bring in extra revenue, the evidence suggests otherwise. In combination with the ongoing Iran war and the closure of the Strait of Hormuz, Trump's tariffs have significantly contributed to the ongoing inflation problem. As a result, Federal Reserve policymakers have been forced to implement rate hikes in a bid to combat persistently elevated inflation.