❓WHAT HAPPENED: A 150-year analysis challenges conventional wisdom on the impact of tariffs, suggesting they lower prices and raise unemployment, contrary to establishment economic models.
👤WHO WAS INVOLVED: Researchers Régis Barnichon and Aayush Singh from the Federal Reserve Bank of San Francisco conducted the study.
📍WHEN & WHERE: The study analyzed data from 1870 to 2020 across the U.S., the U.K., and France, with findings published in November 2025.
💬KEY QUOTE: “We find that a tariff hike raises unemployment and lowers inflation,” the authors stated in their working paper.
🎯IMPACT: The findings challenge establishment economic models and suggest tariffs may work through demand-side mechanisms, reshaping debates on trade policy.
A major study released by researchers at the Federal Reserve Bank of San Francisco confirms what The National Pulse has long reported, i.e., tariffs are not inflationary and more often than not, have deflationary effects that push prices downward. The analysis, which covers 150 years of economic and trade data from the United States, the United Kingdom, and France, has major implications for how the Federal Reserve and economists understand President Donald J. Trump’s tariff policies.
“We find that a tariff hike raises unemployment and lowers inflation,” the authors, Régis Barnichon and Aayush Singh, write in their working paper released this month. “This goes against the predictions of standard models, whereby CPI inflation should go up in response to higher tariffs.”
Importantly, the study’s findings reveal that tariff shocks operate primarily through aggregate demand mechanisms—affecting confidence, investment, and spending patterns—rather than through the simple cost-push mechanism that trade models typically emphasize. This distinction matters enormously, as it means tariffs can be used as a policy tool without triggering the consumer price spirals that economists have incorrectly warned about for generations. The National Pulse has similarly reported that the most infamous trade levies in American history, the Smoot-Hawley Tariff, had deflationary effects that fed into a larger deflationary event caused by the Great Depression.
The paper raises questions about the Federal Reserve’s response to tariffs, with the central bank’s chairman, Jerome Powell, having insisted for months that it would lead to increased inflation. If the main effects are lower inflation and higher unemployment—a key signal of deflationary demand destruction—monetary theory suggests that the Fed should cut interest rates when tariffs are imposed. Instead, the Fed largely held interest rates steady, only moving to slash borrowing costs in September despite President Trump correctly pushing for rate reductions since March.
Join Pulse+ to comment below, and receive exclusive e-mail analyses.
