Claudia Sahm
Appearances
Wall Street Breakfast
Tariffs and other inflationary pressures
And so we had issues in terms of getting goods there. But one aspect that I don't think it's talked maybe enough about is at the very beginning of the pandemic, there were initially restrictions on people being able to go out and buy services. And then even in places that didn't have the restrictions, The pandemic itself was a restriction, right? People didn't want to get sick.
Wall Street Breakfast
Tariffs and other inflationary pressures
They were afraid they did. So you saw early in the pandemic, this massive pullback on spending on services, right? So it is true that the government gave out a lot of stimulus relief to families, particularly like bottom 70%, 80% by income, but you had also higher income families who who just weren't out there spending.
Wall Street Breakfast
Tariffs and other inflationary pressures
And so you can see this like just outsize divot in the amount of spending that happened. Well, that also was part of the, what later was referred to as the excess savings. Like even just that pent up demand of where we had a bunch of money that had been set aside, people hadn't been able to go out and spend.
Wall Street Breakfast
Tariffs and other inflationary pressures
And then when the vaccines came out and the world started to really open up and people felt comfortable, like that surge in demand, was going to have inflationary effects. So we had some things that were built in from, there was a pandemic, it really changed people's behaviors.
Wall Street Breakfast
Tariffs and other inflationary pressures
And then like that unwinding of it was going to cause like there were just pressures on supply or big changes in behavior, like moving from goods to services or from services to goods really rapidly. So like all of those were going to be inflationary pressures. And then on top of that, there was a lot of support sent to households, businesses and localities.
Wall Street Breakfast
Tariffs and other inflationary pressures
to kind of keep demand going, get through the pandemic. So we went at this as if it was a big demand crisis. driven recession. So that piece of it probably could have been better tailored, maybe not quite as large. But we do see across, if you look across the world, there is a very common experience of inflation picking up and even remaining elevated to some extent.
Wall Street Breakfast
Tariffs and other inflationary pressures
And there's quite a bit of variation on how much of that, say, fiscal relief So we were going to have inflation. I think there certainly could have been policy decisions that maybe would have made the inflation less. So I don't think all of it was inevitable, but a substantial portion of it goes back to the pandemic and the disruptions it caused.
Wall Street Breakfast
Tariffs and other inflationary pressures
So the details do matter in terms of it has been in the past. You can see cases where if it's really easy to kind of get around the tariff, right, like source from a different country, then the importers will make efforts to not pay the tariff and then there's not anything to pass on to consumers.
Wall Street Breakfast
Tariffs and other inflationary pressures
There have been cases even during the first Trump administration where, you know, if if if it's not as possible to get the sourcing. Well, then then there is a cost and it's at least partially paid for by the consumers and higher prices like that has that has been the experience. Now you can get into an argument about whether it's. offset in other prices and really is it aggregate inflationary?
Wall Street Breakfast
Tariffs and other inflationary pressures
But I mean, on the goods that are tariff experience, again, it depends on the details of the tariff, but if they're broad based and putting broad based on Canada and Mexico with limited opportunities to like have other sourcing, that's a recipe for consumers paying more. And it's really kind of interesting.
Wall Street Breakfast
Tariffs and other inflationary pressures
I wrote about Reasoning for Bloomberg Opinion and done some work on various kinds of surveys and polls that have gone to consumers. There's more awareness of tariffs than I would have expected. But I think we're in this moment where people are inflation-weary. This has been a difficult several years of higher price increases, and now we have a higher price level.
Wall Street Breakfast
Tariffs and other inflationary pressures
And even there was a recent poll in December. Consumers really take President Trump seriously, that there are going to be big broad-based tariffs. They're ready for this. Even among Republican respondents to this one poll, there's an understanding that at least a portion of this is going to be paid for by consumers with higher prices. And the go-to for a lot of people as well.
Wall Street Breakfast
Tariffs and other inflationary pressures
We'll just try and get ahead of it and buy early. I think people are, and there's maybe, There's even some signs in some of the data we've gotten from December, whether it's imports or durable goods, that people may actually be doing this. And that has its own effects. But I think there are costs coming.
Wall Street Breakfast
Tariffs and other inflationary pressures
Now, the question, you know, it's an economic policy, and then you can have discussion about, well, are those costs justified, right, in terms of increasing domestic production or decreasing Mexican Canada tariffs about fentanyl and so forth. and immigration. So, you know, it's complicated, but it does, it looks like, at least on the goods tariffed, there is likely to be a price effect.
Wall Street Breakfast
Tariffs and other inflationary pressures
Thank you. It's wonderful to be here.
Wall Street Breakfast
Tariffs and other inflationary pressures
To some extent, the pandemic and some of the public health responses, which I think were necessary, created an environment that was going to cause inflation. And this goes back to what I was talking about with these supply dimensions. And it's not just that countries shutting down or putting real public health restrictions on methods, say global supply chains, really ground to a halt.