Supporting "Trump Tariffs"? Federal Reserve Board Member Mullan: The American public has not been impacted!

Federal Reserve Board Member Stephen Milun on Monday stated that the actual impact of the Trump administration’s tariff policies is much milder than many people feared. He pointed out that the burden of increased tariffs is primarily borne by foreigners and foreign companies, rather than American consumers.

On that day, during an event at Boston University’s Questrom School of Business, he said, “I believe that over time, many experts are gradually recognizing my view that tariffs have a relatively limited impact on the economy.” He mentioned that a year ago, at the start of Trump’s second term, there was widespread concern that a surge in import taxes would harm the economy.

Milun also rebutted the common economic view that tariffs are ultimately passed on to American consumers through higher prices rather than being passed on to exporting countries through lower profit margins. When the Trump administration took aggressive trade actions against many countries, including the United States’ closest allies, its core claim was that “tariffs would not be borne by Americans.”

Milun’s view seems to be inconsistent with the mainstream perspective.

The Federal Reserve previously stated that a large impact from tariffs has already been transmitted through the U.S. economy, and that tariffs could cause a one-time increase in prices. Most of the inflation exceeding expectations was attributed to tariffs rather than demand. Although many officials also pointed out that the impact of tariffs is milder than expected, it may only cause a one-time rise in price levels without leading to persistent inflation.

Even Trump himself last year admitted that his tariff policies led to higher prices for Americans and said that although the policy was overall beneficial to the U.S. economy, “I think the public may have paid a certain price for it.” Milun, before joining the Federal Reserve, was a senior economic advisor to the Trump administration.

Other studies have shown that most of the tariff burden falls on Americans. The Yale Budget Laboratory released a report at the end of last month stating that the median annual tariff burden per household is about $1,400.

Milun pointed out that accounting issues seem to obscure the true burden of tariffs. He explained that, “In the data, it appears that American entities are bearing the burden, but in reality, it’s just the U.S. subsidiaries of foreign companies.”

“Relying solely on these data to assert that Americans are bearing the tariff burden is completely inappropriate, because some of these companies are actually subsidiaries of foreign firms,” he added.

Milun also stated that tariffs, combined with other government policy adjustments, can help improve the long-term outlook for government finances.

“Tariff revenue will play an important role in reducing the primary deficit,” he added. Currently, the legality of these tariffs is being reviewed by the Supreme Court, which may overturn them. Trump warned that such a ruling would be a disaster.

(Original source: Caixin)