Budget expert says tariffs are ‘most inflationary’ in our lifetime

[0:00] Today marks one year since Liberation Day, the day President Trump unveiled a long list of [0:04] double-digit tariffs on virtually every U.S. trading partner. One year out, a lot has changed. [0:10] Those tariffs have been paused, escalated, decreased, exempted, up until the February [0:15] Supreme Court decision struck down many of Trump's import taxes. Here's where things stand [0:20] one year later by the numbers. The average tariff rate soared the days that followed Liberation Day, [0:26] at one point topping 24 percent, the highest average rate since the Great Depression. [0:31] Goods from China were briefly subject to a tariff of 145 percent, which brought imports [0:36] from that country to a virtual standstill. The tariffs generated tens of billions of dollars [0:42] in revenue for the federal government. But after the high court ruling, customs officials [0:46] are working to refund more than $160 billion in tariffs wrongly collected. [0:52] President Trump promised these taxes would boost domestic manufacturing, [0:56] but the U.S. government is not doing that. [0:56] The U.S. lost 93,000 manufacturing jobs since last year's announcement. [1:01] The tariffs cost the average American household $1,000 last year. And according to the Nonpartisan [1:07] Tax Foundation, each U.S. household can expect to pay $600 more in taxes this year. [1:13] The president also proclaimed the tariffs would reduce the trade deficit. In 2025, [1:18] that deficit fell by just $2.1 billion, compared to the more than $100 billion drop in 2024. [1:25] And today, we're going to talk about the tariff rate. [1:26] And today, we're going to talk about the tariff rate. [1:26] And today, we're going to talk about the tariff rate. And today, we're going to talk about the tariff rate. [1:26] And today, one year after Trump's remarks at the White House, [1:29] new data shows a majority of Americans are skeptical of the president's handling of the [1:33] tariff policy. With more on this, let's bring in Natasha Sarin, president and co-founder of [1:39] the Budget Lab at Yale University. Natasha, thank you so much for joining us. It has been one year [1:44] since the Liberation Day tariffs were announced. What's your assessment of where we are today? [1:50] These tariffs, when they were announced last April, were instituted at the highest level [1:55] this country has seen over the course of the last year. [1:57] As a result of the various swings and changes with respect to this tariff policy, tariffs initiated [2:06] on countries one day and then put on pause the next, the effective tariff rate in this [2:10] country has changed more than 50 times over the course of the last 365 days. [2:18] And so I think what is important in understanding the impact that these tariffs are having is [2:22] not just the level. They remain at the highest level that we've seen over the course of the [2:27] last many decades, but also that volatility and that uncertainty with respect to how the economy [2:33] is meant to function in a world in which the trading rates that are governing our relationships [2:38] with our partners, allies and adversaries alike are changing with such frequency, including this [2:43] afternoon as a result of these new pharmaceutical tariffs that were announced. And what do you think [2:49] is the long-term impact from these tariffs and can we come back from it? I think the impact is [2:58] the most inflationary policies that we've seen in our lifetimes. Our most recent estimates [3:03] were the effective tariff rate before this afternoon's announcements was essentially [3:07] 11%, about five times what it was when President Trump took office for a second term. Is that [3:13] that cost the American people something on the order of $1,000 plus of price increases [3:19] in each year, something on the order of $30 billion less of economic growth in this country [3:25] annually. But sort of the longer term impact. [3:28] And the way in which this reverberates in the economy is just as significant as those price [3:34] effects and those economic growth effects in that what has happened is we have done significant [3:41] damage with respect to the global economic order that allowed the United States to work with its [3:47] allies in order to ensure our economic security and our national security. And a lot of that [3:52] goodwill and capital that has taken decades and decades to build in this country has been [3:57] dissipated very significantly. [3:58] And certainly by the volatility and the trade war that we initiated this this time last [4:03] year. And so I do worry that those consequences are likely to be with us for some time to [4:08] come. [4:09] And Natasha, as you know, the war with Iran continues to have an economic impact. Oil [4:14] prices are surging. U.S. crude oil tops one hundred and ten dollars a barrel. Summer airfare [4:19] soaring 20 percent, many families canceling their spring break plans. Where do you see [4:24] things going from here? [4:25] Yeah, what I think is really important and significant to understand is that the [4:29] stand is that you are in a situation where, on the one hand, you have this inflationary [4:35] policy being pursued with respect to these tariffs. And on the other hand, you have an [4:41] extreme inflationary shock coming with respect to global oil prices as a result of the prolonged [4:47] closure of the Strait of Hormuz, which my colleagues and I at the Budget Lab at Yale [4:52] have estimated is likely to shave off about 0.3% of GDP over the course of the next year [4:57] if this closure is sustained. And so those two effects simultaneously are essentially putting [5:02] pressure on everything that the American consumer consumes, be it goods that are imported from other [5:08] countries or the price of oil, which is now topping over $100, and that translates into gas [5:15] prices that are over $4 in this country for the first time in the last three or four years. [5:21] Hopefully we see some improvement. Natasha, thank you very much. Natasha Saron with the Budget Lab [5:26] at Yale University. [5:27] I do want to mention the Budget Lab is releasing a tariff rate tracker, which is a tool that allows [5:32] you to estimate tariff rates by country, which is really neat.