Staff Reports
The New York Federal Reserve has released a study claiming that the tariffs imposed during Trump’s first term wreaked havoc on the American economy, suggesting a catastrophic $4.1 trillion loss in stock market value and a supposed “welfare loss” for American citizens. However, a quick glance at the economic realities during those years tells a very different story, one filled with rising incomes, a thriving stock market, and low unemployment rates—quite the opposite of the doom-and-gloom picture painted by Fed economists.
At first glance, it seems the establishment continues to peddle narratives that just don’t mesh with real-world outcomes. The Fed’s analysis comes loaded with alphabet soup of economists who seem to have forgotten economic fundamentals. While the study warns of devastation caused by tariffs, Tariff Tuesdays were not just good for comedy clubs; they coincided with an era of remarkable economic prosperity. In other words, while the Fed suggests we’re nursing wounds to our economy, the data demonstrates it was essentially flexing its muscles.
In today's post (the first in a series of two), the authors use financial market data to suggest that the trade war between the U.S. and China from 2018 to 2019 had a negative effect on the U.S. economy that was substantially larger than past estimates. https://t.co/XKKJ9rMlFG
— New York Fed (@NewYorkFed) December 4, 2024
The miscalculation at the heart of the Fed’s study lies in its overly simplistic focus on a narrow ten-day reaction window following tariff announcements. By this metric, the stock market is said to have lost significant value, but why stop there? Why not look at 30, 60, or even 120 days later? When the broader time frame is assessed, the narrative shifts dramatically. Stocks didn’t just flop like a fish out of water; instead, they rebounded, showcasing a resilient economy that adjusted to new trade policies. In the face of potential uncertainty, instead of flopping, the market flexed—yielding an impressive four-week gain following the announced tariffs.
The Fed seems confused, treating the momentary jitters of the stock market as a barometer for overall economic health. However, savvy individuals know that stock prices can be influenced by a myriad of factors, including investor sentiment—often overstated in moments of perceived instability. The evidence shows the economy was not only surviving but thriving during these contentious tariff debates, with household incomes leaping and unemployment hovering at historic lows.
Moreover, the Fed’s analysis conveniently omits key elements from the economic backdrop of those years—the actions of the Federal Reserve itself and the global economic climate. The Fed tightened monetary policy in 2018 but reversed course in 2019, jumping on the rate-cutting bandwagon to soothe market concerns. And let’s not forget that the trade climate was fraught with apprehension over a slowing global economy—independent variables that should’ve entered the Fed’s calculations but instead were ignored in its rush to pin blame on tariffs.
The real takeaway from this whole debacle is that the tariffs weren’t reckless bans on fun; instead, they were corrective steps to address years of imbalanced trade practices, especially against nations like China. The critics who howl about the dangers of tariffs seem to have forgotten that America’s manufacturers have been crying under the weight of global competition for far too long. Tariffs were necessary to reclaim a fair shake for American workers and allow the economy to recalibrate toward balanced trade practices. Far from signaling the demise of the economy, the tariffs ushered in a necessary shift that many American businesses and consumers have readily adapted to.
If there’s anything to be said about the Fed’s findings, it’s that they might be more reflective of the institution’s narrow perspective rather than the broader economic horizon. It turns out that disruptions can lead to growth, and in the grand game of economics, resilience is often just as important as stability. The Fed should take notes from the real story of America’s adaptability and strength during the tumultuous years of Trump’s tariffs—this saga is less about calamity and much more about how America continues to rise to the occasion, regardless of the challenges thrown its way.
