The Tariff Apocalypse That Never Was: What If the Experts Were Just Wrong?

Bepi Pezzulli Explains Why the Tariff Panic Was Overblown — and What the Data Really Shows.

For years, we were assured that tariffs, especially Trump’s, would unleash a cascade of price hikes. Economists, pundits, and trade experts warned of a pass-through effect so potent it would turn Main Street into a battlefield of $10 eggs and $2,000 smartphones.

And yet, in April 2025, U.S. core inflation fell to 2.5 percent, the lowest reading since March 2021. Headline CPI rose just 0.2 percent month-over-month and stood at 2.3 percent year-over-year. In May, core inflation came at 2.8%, headline CPI rose 0.1 per cent month-over-month and stands at 2.4 percent year-over-year. In other words, the tariff apocalypse never arrived. It’s not just that prices haven’t spiraled. They’ve cooled.

This development demands more than a passing mention. It calls into question one of the central dogmas of post-1990s economic orthodoxy: that tariffs are always and everywhere inflationary. The empirical record is now pointing in a different direction, and it is worth asking why.

First, the standard textbook claim, that tariffs raise consumer prices, is based on a simplistic view of international trade. In theory, import duties increase the cost of foreign goods, which is then passed on to consumers. But this is only part of the story. In practice, the pass-through of tariffs into final prices depends on a number of mitigating factors: currency movements, changes in supply chains, competition among foreign producers, and shifts in consumer behavior.

In the case of the Trump and Biden-era tariffs, the U.S. dollar has remained strong, especially relative to the renminbi and other export-driven currencies. A stronger dollar offsets some of the nominal increase in import costs, muting the inflationary impact. Moreover, exporters, particularly Chinese manufacturers, have frequently absorbed some of the tariff burden themselves, in order to retain market share in the American market. Pricing power is not unidirectional, and foreign producers facing a saturated global demand curve have often chosen to reduce margins rather than lose access to U.S. consumers.

Second, the nature of post-pandemic inflation was never about trade policy. The inflationary surge of 2021–2022 was driven primarily by services, housing, and domestic labor costs, not tradable goods. Goods inflation spiked early due to COVID-era supply chain disruptions but peaked by mid-2022. Since then, it has been declining steadily. Inventory accumulation, logistical normalisation, and the return of global manufacturing capacity have pushed retailers to discount, not raise prices. Meanwhile, service sector inflation, especially in rent and healthcare, has proven more persistent, precisely because it is insulated from international competition.

The tariffs, far from being a major inflationary factor, have played a minor role in this broader inflation cycle. In some cases, they may even have had mildly disinflationary effects. By encouraging reshoring and diversification of supply chains, tariffs have fostered a more resilient and less price-sensitive industrial base. Shorter supply chains are less vulnerable to geopolitical shocks, freight volatility, and the logistical chaos that inflated goods prices in 2021. In this light, tariffs look less like a tax on consumers and more like an insurance premium against fragility.

Third, the macro environment has been shaped decisively by the Federal Reserve’s monetary tightening. Starting in March 2022, the Fed raised rates aggressively, ultimately taking the federal funds rate above 5 percent. That shift filtered through the economy in predictable ways: wage growth slowed, job openings declined, and credit became more expensive. Crucially, expectations of future inflation remained anchored. The Fed’s credibility allowed for a soft landing, not a spiral. The tariffs, whatever their nominal effect, were swamped by broader monetary dynamics.

Yet the narrative persists. Much of the economics commentariat continues to insist that tariffs are inherently inflationary—even when faced with disinflation in real time. Why? Partly because the consensus on trade has been frozen in the 1990s, when globalization appeared frictionless and consumers saw clear price declines as supply chains spread worldwide. That world no longer exists. Geopolitical rivalry, environmental constraints, and technological advances have changed the cost-benefit calculus of trade. Tariffs are now part of an industrial policy toolkit, not a bludgeon against prosperity.

There is also a psychological angle. For many economists, free trade is a moral commitment as much as an analytical stance. To question its immediate benefits is to risk sliding down the slope toward nationalism and protectionism. But policy must respond to changing facts, not fixed dogma. If tariffs no longer produce the inflationary shock once feared, then they deserve to be assessed on empirical, not ideological, grounds.

None of this is an argument for blanket protectionism. Tariffs can be misused, and some sectors may still suffer from badly targeted trade barriers. But the categorical certainty with which experts once denounced them no longer holds. The April inflation reading is more than a datapoint, it is a reckoning. Tariffs did not crash the economy. They did not spark runaway inflation. They may have helped reinforce domestic capacity and discipline import dependence, without triggering the price chaos that was endlessly predicted.

The takeaway is simple, if inconvenient: sometimes the experts are wrong—not because they are ill-intentioned, but because their models are outdated, their assumptions inert, and their priors unexamined. Tariffs were supposed to be the match that lit the inflationary bonfire. Instead, they turned out to be a damp squib.

Bepi Pezzulli is a Solicitor of the Senior Courts of England and Wales specializing in Governance as well as a Councillor of the Great British PAC. He tweets at @bepipezzulli