Since the beginning of the current decade, tariffs have been part of global economic policy that has created multiple impacts on global markets. In recent years, we have witnessed radical changes in how companies deal with this policy. In terms of economic psychology, we find that the impact of tariffs is no longer the same as it was in 2018, but has become more influential in various aspects of the economy. With the new challenges facing the global economy in 2025, it has become necessary to re-evaluate the impact of these fees on inflation and economic growth.
Tariffs: Price Change or Inflation?
It is known that tariffs lead to changes in prices, and can be considered a one-time tax increase. In 2018, most forecasts indicated that this price increase would be sudden but not permanent, and would not lead to long-term inflation. But in 2025, the situation is different. It has become clear that companies are no longer avoiding raising prices as they were in the past. Initially, companies were reluctant to raise their prices due to fear of losing customers. But over time, many companies have realized that raising prices slightly may not significantly impact sales volume.
Psychological Inflation and the Impact of Tariffs
This point is essential to understanding current economic changes. Inflation is not just a purely economic phenomenon, but also a psychological phenomenon shaped by the perceptions of individuals and companies. In the years between 2008 and 2020, companies faced less pressure to raise prices due to stable inflation. But this changed after the pandemic. As prices escalated due to increased demand and rising costs, consumers began to accept higher prices, and the market psychology changed radically. Many began to believe that prices would gradually rise, so it became normal for prices to increase continuously.
Direct Effects on US Markets
In the United States, the term of former US President Donald Trump was a period that witnessed the imposition of many tariffs on major trading partners. At that time, expectations about inflation were relatively low, and companies were less willing to raise prices due to fear of losing market share. Over time, companies began to adapt to the new reality. It has become clear that raising prices can lead to increased profit margins, even if some companies lose some of their customers.
Changes in corporate and consumer psychology
Today, companies are more aware of their ability to raise prices without significantly impacting demand. According to Timiraos, companies are more willing to raise their prices, even when the cost of imports increases as a result of tariffs. This change in economic psychology reflects the fact that companies have come to realize that higher prices may not necessarily lead to a significant decline in sales. Even companies that were not affected by tariffs have begun to raise their prices under the pretext of increasing import prices.
Impact of tariffs on the US dollar
There is a growing expectation that tariffs will lead to changes in the US dollar. In the past, the effects of tariffs have led to fluctuations in the US dollar, and the dollar may see a partial appreciation to compensate for the inflation caused by these tariffs. However, there are downsides to these tariffs. They may indirectly increase inflationary expectations, prompting companies to gradually and continuously raise prices.
Moving to a new phase of inflation
As economic conditions evolve, it has become clear that tariffs are having a greater impact on inflation expectations. In the past, businesses were cautious about the impact of tariffs, but now a large part of the market is preparing for this long-term price increase.
Economic Psychology and Global Business
Even companies that were not directly affected by the tariffs are now acting on the new market psychology. They have realized that their prices should be in line with expected inflation. As inflation increases, companies are now in a position to increase their prices without worrying too much about losing customers.
Bets on Currencies and Financial Markets
On the other hand, the currency market is subject to significant changes due to economic expectations. For example, the USD/CAD pair has recently seen significant changes due to investors’ concerns about the potential impact of tariffs. Companies have tended to buy US dollars regardless of other market changes. However, as doubts about the implementation of tariffs have increased, this shift has begun to affect the currency market significantly.
Factors Influencing Market Movements
Many expect a market reaction after the announcement of tariffs. Markets often react to such decisions with caution, especially when it comes to future inflation expectations. However, there is still concern about the market volatility resulting from these economic measures. Challenges Ahead for Investors
Ultimately, investors will face significant challenges in the post-tariff period. Volatility in financial markets is likely to continue, and there may be a long-term impact on inflation and economic expectations. Investors need to be prepared to deal with these changes in the markets, taking into account the psychological effects that play a major role in buying and selling decisions.
The impact of tariffs on the global economy is no longer what it used to be. These fees have become a major factor influencing the psychology of companies and consumers. As awareness of the resulting inflationary effects grows, companies are more willing to raise their prices, creating a cycle of expected inflation that will continue to impact global markets.
