Those who know me well know that I love a contrarian take on developments—and also know that the rules of economists always apply: for every economist, there’s another with the opposite take, and they’re both wrong.

For once, the economic consensus actually seems incredibly uniform on how inflation will play out in response to the tariffs implemented by the US administration. So uniform, in fact, that it almost resembles the collective meltdown of rational economic thinking seen during the early stages of the pandemic. Moreover, it seems everyone has concluded that growth is headed down the drain as a consequence of the same tariffs. I’m not sure either claim is entirely correct—or at the very least, it’s far more nuanced than the prevailing “inflation up, growth down” narrative. Here is why! 

First, I’d like to reiterate a point I’ve made over and over in recent months. The tariff threats and deadlines obviously lead to a material front-running in imports, as companies rush to get goods into the US in time to avoid the tariffs. Loads of economists have struggled to grasp that simple reaction function, but executives obviously don’t live under a rock. They act in time—and the US private sector has filled up storage ahead of the tariffs to a very large extent. That’s why the growth level in Q1 will remain very solid, if you set aside the technical “net import” equation, which is vastly skewed by the front-running of tariffs in, for example, metals and car components. The Atlanta Fed now partially acknowledges that as well, after weeks of academic back-and-forth.

The weakness currently seen in the US is more of a “periodization issue” than an actual meltdown in economic activity. And if that thesis holds, we should expect a comeback once we’re on the other side of this tariff-fueled reaction function.

Chart 1: Growth is still positive if you adjust for the metals imports