Here’s an idea: What if new tariffs are deflationary?

If you’re inclined to dismiss that out of hand, I won’t blame you. I am too. Tariffs are a de facto consumption tax which could conceivably result in lower spending, but generally speaking — ceteris paribus — they just result in higher prices one way or another. It’s worth noting that when the price of imported goods goes up, it allows domestic producers to raise prices. And as we’ve seen over the last several years, corporates will raise prices if given the opportunity.

Of course, all else is never equal, and this macro environment isn’t that one, where “that one” means 2018’s economy.

Conventional wisdom says a red sweep in November and the subsequent institution of Donald Trump’s policy platform — so, unfunded tax cuts, tariffs and immigration curbs — would risk rekindling an inflation impulse the Fed’s just now managed to snuff out. But BofA’s Michael Hartnett suggested otherwise.

First, he noted that Trump’s trade war saw the biggest increase in US duties collected in 90 years.

The Biden administration kept in place much of Trump’s trade policies.

This time around, Trump’s talking about imposing a 10% levy on all imports, and 60% on imports from China. Inflationary, surely. Or “surely?” as an interrogative, maybe.

“New tariffs [over the] next 12 months [would be] deflationary not inflationary,” Hartnett ventured, in the latest installment of his popular weekly “Flow Show” series. “The Q1 2018 trade war backdrop was strong macro (ISM at 60) and low rates (Fed funds at 1.25%),” while the “backdrop for [another] big rise in tariffs in H1 2025 is ISM <50, Fed funds at 5.5% and a much weaker global economy.”

So… depression? Hey, at least prices would fall!