Why haven’t Trump’s tariffs crashed the US economy? | Jeffrey Frankel

Effects on inflation and employment have not been as bad as feared – but could still materialise with full force in 2026When Donald Trump took office last January, most economists feared what would happen if he raised tariffs. The expectation was that, as the new duties drove up prices of consumer goods and inputs – affecting households and companies, respectively – surging inflation and falling real incomes would follow. This would be a supply shock, so the US Federal Reserve could not do much to counteract it.Trump did raise tariffs to shocking levels, violating international agreements and blowing up the Republican party’s oft-professed commitment to free trade. In terms of severity and disruptiveness, Trump’s 2025 tariffs went far beyond the already harmful tariffs of his first term, a