China Tariffs Prove Unrelated to Increased Inflation; Corporate Profits Tell the Real Story

By: Taylor Buck, Rethink Trade Program associate

I took a look at the actual data underlying various arguments about what can be done to cut inflation — aka rising prices. So, here’s something some economists apparently did not check out before suggesting that cutting U.S. tariffs on China could bring down prices: There’s no correlation between tariffs being imposed and prices rising. As the figure below shows, the inflation rate remained relatively stable during the period of steady tariff increases on Chinese goods between July 2018 and February 2020. Contrast that with the jump in inflation over the past year while no new tariffs have been imposed. Indeed, the U.S. tariff rate on Chinese goods has remained fixed since February 2020, long before the current inflation increase began. Ironically, some tariffs on other countries’ goods were removed during the period of rising inflation.