Amid declining consumer confidence and persistent inflation concerns, the early days of Trump’s second term are marked by economic uncertainty. Despite facing criticism for his tariff tactics, a pattern of threats, limited implementation, and subsequent rollbacks characterizes his administration’s approach. 

This “tariff threat theater” might paradoxically help alleviate inflation by inducing consumer demand moderation. The repeated threats of tariffs, followed by inconsistent application, can create a placebo effect, dampening demand without sustained price increases. 

While tariffs typically lead to higher consumer prices, the uncertainty surrounding Trump’s threats prompts businesses to absorb costs rather than pass them on to consumers. This economic dynamic, unintentional in Trump’s strategy, could help temper inflation amid existing economic challenges. 

Although not intentional, this inflation-dampening effect contrasts with Trump’s primary goals of protecting American industries and reducing trade deficits. The scheme’s unpredicted impact as an anti-inflation tool underscores the uncertain nature of economic policy under the current administration. 

As the economic experiment unfolds, policymakers must weigh the short-term benefits against long-term risks of governing through threats. While the strategy may temporarily ease inflation concerns, it could have lasting implications for economic planning, international relations, and policy credibility. 

Nicholas Creel, Assistant Professor of Business Law and Ethics at Georgia College and State University, analyses the evolving economic landscape under Trump’s unconventional tariff tactics.