Trump's Tariffs Push Inflation Higher: 'Trumpists Are Happy To Promote A Straw Man,' Says Paul Krugman - State Street SPDR S&P 500 ETF Trust (ARCA:SPY)

Trade Policy and Inflation - Economist Paul Krugman argues that tariffs have increased U.S. inflation by exactly 0.8 percentage points [1] - Krugman identifies that tax receipts from customs duties rose from 0.3% of GDP pre-Trump to 1.1%, indicating a direct inflationary impact of 0.8 percentage points [2] - The HBS Pricing Lab supports this by estimating that the Consumer Price Index (CPI) is currently 0.8 percentage points higher due to tariffs, aligning with the 2025 core PCE inflation nowcasts at 3% [3] Misconceptions about Tariff Impact - Krugman suggests that the perceived "puzzle" of low tariff inflation is a narrative rather than a mathematical reality [3] - He notes that the modest rise in prices corresponds with actual tariff rates, not headline rates, due to various exemptions and corporate maneuvers [4] - High tariffs led firms to utilize existing exemptions that were previously not worth the paperwork when tariffs were lower [4] Market Performance - The top U.S. indices closed mixed, with the S&P 500 index rising 0.23%, while the Nasdaq Composite and Dow Jones index fell by 0.29% and 0.50%, respectively [5]