Breibart Business Digest: How the Federal Reserve Got Tariffs Backward

The result was two tightenings working in the same direction—tariffs pushing down on employment and prices, and the Fed also pushing down for fear of the inflation that never came. Some of the disinflation achieved in 2025 came not just from the tariffs themselves but from the Fed’s decision to treat tariffs as inflationary and hold back on cuts. In practice, this would have meant the Federal Reserve cutting rates more decisively in 2025, leaning harder against the labor market softening effects of the tariff shock, and treating the tariff-plus-lower-rates combination as complementary rather than contradictory.

Author: John Carney

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