The Same Tariffs That Raised Prices Are Being Used to Lower Them

In the same December week the president called the affordability crisis a "hoax," his administration was exempting coffee and bananas from its own tariff schedule so those two items wouldn't get more expensive. The carve-out was aimed at the very regime the Tax Foundation had just measured: tariffs have pushed average retail prices 2.1% above their pre-tariff trend, with coffee and tea up 7% ^[1]. One grocery shelf, the whole contradiction in a single object. The tariff loop runs the same way through every lever of the regime. The Fed's own survey of 6,500 small businesses found 76% passing tariff costs straight to consumers ^[2]. When beef threatened $10 a pound, the administration ordered a Justice Department probe of meat packers and scrapped the tariffs on beef and farm equipment it had itself imposed ^[3]. Operation Affordability eliminated tariffs on more than 200 agricultural products after Republican losses in Virginia, New Jersey, and New York — a retreat Democrats read as a tacit admission that the trade war had fueled inflation ^[4]. The drug-pricing deals that cut weight-loss drugs from $1,350 to $199 a month were enforced the same way, trading tariff exemptions for Medicaid discounts ^[5][6]. And the $2,000 "tariff dividends" the president proposed would simply rebate to households the revenue the tariffs had collected from them at the border ^[7]. Asked how people should cope in the meantime, he suggested giving up products like pencils.

All it means is you pay less per month. Pay it over a longer period of time. It’s not like a big factor. It might help a little bit. — Donald Trump

The instrument that raises prices is the same instrument used to lower them. The war loop is the same shape, drawn in oil. The United States and Israel opened the Iran war themselves, with preemptive strikes on nuclear sites in late February — not a response to an attack ^[8]. Iran's answer was to choke the Strait of Hormuz, through which a fifth of the world's oil moves; traffic fell 90 to 95%, crude passed $100 a barrel, and gasoline sat above $4 a gallon for 103 days ^[9][10][11]. Shipping costs from Asia doubled, and domestic airfares jumped from $293 to $383 ^[12]. This week the president summoned oil executives to demand they lower the prices his own war had raised, and accused refiners of gouging while they booked record profits from the disruption ^[11]. To replace the supply the conflict choked off, he struck a deal giving the U.S. government a 55% stake in Venezuelan oil ^[11]. The third loop is the shortest and the fastest. The president insists the Strait of Hormuz is open while traffic through it is down 90 to 95% ^[9]. He says growth doesn't cause inflation, and he has told the Fed what he wants.

We should have the lowest interest rates anywhere in the world. — Donald Trump

Inflation sits at 3.7%, the 65th consecutive month above the Fed's 2% target, and the FOMC just split 9-3, with three members voting for an immediate hike ^[13][14]. The one institution that can say no is the Fed, and its chair is still saying it. Fed Chair Warsh keeps repeating, ahead of the September 16 meeting, that inflation is running above the 2% target and that the Fed's focus right now should be on prices ^[15]. But even the Fed is bending. While the rate channel holds, the money supply is growing at its fastest pace since the pandemic — $103 billion in July, $256 billion in May ^[16]. The loop runs through every lever of policy, and the one institution that can say no may be finding a way to say yes through a different door.