Despite renewed fears that President Donald Trump’s proposed tariffs could reignite inflation, an emerging contrarian theory suggests the reality may be far less alarming than many on Wall Street currently expect.
In a note shared Tuesday, Yardeni Research President Ed Yardeni said investors and consumers might be overstating the inflationary consequences of what he dubbed Trump’s “Nitro Tariffs,” or TNT.
“Tariffs are stagflationary,” Yardeni said, “but consensus expectations may be overestimating the inflationary impact and underestimating the downside risks to growth.”
Are Tariff Inflation Fears Justified?
Latest consumer sentiment data is painting a confusing picture. The Federal Reserve Bank of New York reported consumer expectations for inflation rose to 3.6% in March.
That number is well below the University of Michigan’s Consumer Sentiment Index, which showed a jump in inflation expectations to 5% during the same month. In April, the latter soared again to 6.7%.
The veteran Wall Street analyst called the University of Michigan’s reading “too panicky,” pointing to historical data that ties the survey’s inflation expectations closely to gasoline prices, which have remained subdued.
“Inflation might not rise as …