Tariffs and inflation aren’t the same: What you need to know

Many people confuse tariffs with inflation, thinking both lead to continuous price increases. Ted Thatcher, President of Bright Lake Wealth Management, joined TheStreet to break down the key differences and reveal what they really mean for your wallet.

Related: Goldman Sachs unveils tariffs prediction, recession forecast

Full Video Transcript Below:

TED THATCHER: I will say I think that there's a little bit of a misnomer at times between inflation in and of itself versus a hike in cost caused by a tariff. Inflation will consistently happen over time, further and further, because the costs to create that good go up. A tariff is actually something that actually only happens one time, right. The tariff is in place. It's 10% say, and I have a bottle of water that costs 10% more than it did last year. That's a huge hike in prices. But unless that tariff goes up again to 20% or something like that, I'm not going to experience that cost down the line. 

I think that sometimes the understanding of how the cost is incurred by the consumer or by businesses isn't always fully outlined and nuanced. Of course, when you throw a large cost into a trade route. It creates all these new types of incentives. And so, for example, if that cost gets high enough, then the incentives change for both the buyer and the seller. And maybe manufacturing has to get stood up in the United States, for example, and things like that can certainly affect costs as well. But the tariff in and of itself is a one time cost. And I think that that's just worth noting