Tariff Inflation: The Dog That Didn't Bark

U.S. Treasury Secretary Scott Bessent admitted he was wrong about tariffs being inflationary during a House Financial Services Committee hearing. Despite Trump's tariffs, the U.S. economy is growing and inflation is declining. However, recent data indicate potential inflation increases in the coming months.

In a surprising admission before the House Financial Services Committee, U.S. Treasury Secretary Scott Bessent recanted his prior statement that tariffs were inflationary. This announcement followed a previous advisory by his investment firm, Key Square, before Donald Trump's election as president.

Despite the implementation of numerous tariffs by the Trump administration since taking office, Bessent assured lawmakers that the U.S. economy has been experiencing growth while inflation rates are on the decline. "Tariff inflation was the dog that didn't bark," he emphasized, suggesting that the anticipated inflationary effect of the tariffs did not materialize.

However, recent figures from December showed a greater-than-expected increase in the Producer Price Index, signaling that inflation might yet accelerate in the upcoming months, a prospect that Bessent and other economic analysts are closely monitoring.

(With inputs from agencies.)