Tariffs as a Consumer Tax and the Inflationary Impact Guest: Professor John Cochrane Professor John Cochrane explains that tariffs effectively function as a tax on American consumers and create a temporary bump in inflation throughout the economy. Retailers are currently absorbing substantial cost increases but will likely pass these expenses on to consumers after the Christmas holiday season. Cochrane notes the Federal Reserve faces a challenging policy dilemma: tariffs increase prices, yet there is mounting political pressure to lower interest rates. He characterizes tariffs as a potentially costly geopolitical weapon with uncertain strategic benefits.