In a recent episode of Morgan Stanley's Thoughts on the Market podcast, Global Chief Economist Seth Carpenter and macro strategist Mayank Phadke break down the hidden economic toll of tariffs. While tariffs are often framed as a tool to protect domestic industries, Phadke explains that their real cost extends far beyond the initial price hikes on imported goods.
"Tariffs act as a tax on both consumers and businesses," Phadke notes. "They raise input costs for manufacturers, reduce purchasing power for households, and create uncertainty that stifles investment."
The conversation highlights how tariffs disrupt global supply chains, forcing companies to either absorb higher costs or pass them on to customers. This dynamic can lead to slower economic growth and higher inflation in the near term. Carpenter adds that the broader macroeconomic impact depends on how long tariffs remain in place and whether trading partners retaliate.
Ultimately, the episode underscores that tariffs are not a free lunch—they carry significant, often overlooked consequences for the broader economy.
Listen to the full episode for more insights.