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How Free Trade Can Fight Inflation
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How Free Trade Can Fight Inflation

More Competition Means Lower Prices

Gary Hufbauer, Megan Hogan and Yilin Wang
Foreign Affairs, 2022
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Inflation in the United States continues to run at a four-decade high in 2022. Energy costs, the Russian–Ukraine war and trillions of dollars circulating throughout the economy take much of the blame. But restrictive tariffs, set against a backdrop of protectionist trade policies, are an overlooked inflationary element. Economists Gary Hufbauer, Megan Hogan and Yilin Wang argue that slashing trade levies could reduce input costs for firms and thereby tamp down prices. Investors and executives will find this a timely and insightful assessment of US inflation.

Take-Aways

  • US trade policy is feeding inflation.
  • Tariffs increase input costs for companies, which they then pass on to consumers in the form of higher prices.
  • The United States can alleviate inflationary pressures on businesses and households by cutting tariffs and removing other trade barriers.

About the Authors

Gary Hufbauer is a nonresident senior fellow at the Peterson Institute for International Economics, where Megan Hogan and Yilin Wang are research analysts.

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