Understanding Tariff Driven Inflation

What They’re Not Telling You About Lower Interest Rates and Tariff-Driven Inflation

Whether it’s mainstream media or social media, there is a buzz with talk of potential interest rate cuts, framing it as a triumph of economic policy. Yet, this celebration distracts from a quiet and simple fact: there’s a financial threat to every consumer’s budget with tariff-driven inflation. Before accepting the headlines at face value, it’s essential to understand the real signal these interest rate cuts are sending about the health of the economy.

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Analysis and Commentary: The Hidden Cost of Policy Decisions

Updated on October 8, 2025.

Understanding Tariff-Driven Inflation: What They’re Not Telling You About Lower Interest Rates

Between social media posts and excited podcasters, there’s growing speculation that the Federal Reserve may cut interest rates. This is often framed as a signal of a “kick-ass economy.” However, this narrative overlooks a critical, quietly escalating threat: tariff-driven inflation that is already reshaping the cost of living for years to come.

Before reaching a conclusion, we must ask the critical question: Why are interest rates going down in the first place?

The answer is rarely comforting. Rates are often dropped not because the economy is thriving, but because the Fed is trying to stave off something far worse: a recession, high inflation, or the toxic mix of stagflation which is stagnant growth combined with rising prices.

The answer isn’t comforting, and it is not a sign of a kick ass economy. Rates are dropping not because the economy is thriving, but because we’re trying to stave off something far worse: inflation, recession, and the looming threat of stagflation, that toxic mix of stagnant growth and rising prices.

The Race to Inflation Continues. Will the Fed Lower Interest Rates?

Consumer prices continue to climb. I recently broke down a list of grocery items affected by tariffs. And with the potential drop in interest rates, it’s a way to artificially stimulate spending just to keep the economy from flatlining. This isn’t a celebration. It’s a warning.

A Dangerous Economic Playbook: Déjà Vu?

To understand the current environment, we don’t need to look back to the Great Depression, but rather to the COVID-19 pandemic. The global economy was stopped in its tracks. To artificially stimulate spending, the federal government dropped interest rates to near-zero levels. The result? A massive real estate boom occurred because it was easier to qualify for mortgages, which, in turn, artificially inflated home prices.

If tariffs were truly making America wealthy again, interest rates would be a footnote and irrelevant in a booming, self-sustaining economy. Instead, we see the opposite: continued manipulation of monetary policy just to keep the economy flowing.

The Truth About Tariffs and Your Grocery Bill

Consumer prices continue to climb, a phenomenon driven heavily by the implementation of widespread tariffs.

Tariffs Aren’t Free Money. The Impact on Household Costs

Tariffs imposed by the Trump administration are simple to understand in theory: slap a tax on imported goods. Proponents suggest this tax is paid by the exporting country or government. That’s false!

In reality, the tariff is a cost absorbed by the importer (e.g., Walmart, Home Depot, your local grocery store). For a business to maintain profit margins, this cost is invariably passed directly on to the consumer. If the price to import a product increases by 10%, the retail price you pay goes up by at least 10%.

The evidence is clear:

By year’s end, conservative estimates suggest the average household could face $2,000 to $4,500 in additional annual costs just to maintain the same standard of living. This is the hidden tax of tariff-driven inflation.

If there is one thing I have learned, it is that people have a conclusory thought pattern. They go from A to C, skipping B. It’s easy to reach conclusions, but when people do that, they are easily manipulated. So the next time you hear that interest rates are falling, don’t just celebrate, but interrogate. You just have to ask yourself: why?

The effects are felt acutely in the grocery aisle. The cumulative effect of these seemingly small hikes, $40 here, $10 there, is significant. Major retailers like Home Depot and Walmart have announced or enacted price hikes. I’ve experienced this firsthand while fencing my own lot.

To finish the remaining 125 feet, I need approximately 18 more fence posts. Since starting the project months ago, the price of a single post has increased by up to $3. That’s an unexpected $54 added to the project cost for the exact same materials. If I had bought this same property today and started working on the fence, that’s approximately another $345 before the sales tax. The result is simple: you just paid more for the same product.

The Race to Inflation: Why Lower Rates Do NOT Equal Economic Prosperity

Lowering interest rates in an environment already struggling with inflation and tariffs is a classic maneuver to artificially stimulate consumer spending. This is not a celebration. It’s an emergency warning sign. It’s an effort by the Federal Reserve to jumpstart an economy already struggling with stagnant wages and declining consumer confidence, fueled by the rising costs of basic goods.

So whether it’s a podcaster that aligns themselves with the right or those on social media, the simple fact is that no credible economist or global financial firm agrees with this assessment. The failed and infamous Smoot-Hawley Tariff Act of 1930 is widely cited by historians as a major factor that accelerated the Great Depression. Those who forget their history are doomed to repeat it.

Ask Yourself Why

As a professor, I’ve observed not only in students but also people who engage in a conclusory thought pattern, jumping from A to C and skipping the critical B, the analysis. It’s easy to be manipulated by headlines.

So, the next time you hear that interest rates are falling, don’t just celebrate. Interrogate. Ask yourself: What is the real, hidden cost of this “good news,” and who is actually paying for it?

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link. You can also listen to my podcast on Spotify.

You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.

You can find additional categories by clicking below or by using the search feature at the top of this page:

• Bankruptcy
• Insights & Analysis

Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.