Chamath Palihapitiya declares ‘tariffs don’t create inflation,’ as August inflation numbers surprise economists — but does that add up?

At first glance, this looks like a win for consumers. But dig a little deeper, and the story gets more complicated. Let’s break it down.

Here’s the real story

It’s true that inflation came in softer than some economists expected, but prices still went up.

The Consumer Price Index shows overall inflation at about 2.9% year-over-year in August, slightly higher than July’s pace [2]. Core inflation, which strips out food and energy, stayed at 3.1%. Meanwhile, according to Reuters, the jobs market cooled noticeably, with payroll growth shrinking to just 22,000 new jobs and unemployment ticking up to 4.3% [3].

Slower job growth means tighter household budgets, which makes even small price increases sting more.

Why does Palihapitiya’s claim feel off? Because tariffs do affect prices, though it may not be immediate or obvious. When the government slaps taxes on imported goods, businesses often absorb the cost for a while, but sooner or later, most pass it on to customers. Studies from Yale’s Budget Lab estimate that tariffs enacted this year alone have already raised consumer prices by around 2.3%, hitting lower-income households hardest [4].

Researchers at the Peterson Institute for International Economics have also found that even though tariffs can generate revenue over time, they come with negative consequences on the economy, such as slower growth and lower production [5].

And tariffs aren’t the only factor at play.

Rising costs across housing, food, energy and even global shipping disruptions keep pushing prices higher. That’s why one month of tamer inflation doesn’t undo the broader trend. Analysts may guess too high or too low when it comes to inflation, but that doesn’t change the fact that real forces are still pushing prices up and that this has real-time consequences for the purchasing power of Americans.

A cautious approach

For everyday consumers, the takeaway is simple: be cautious. Inflation hasn’t gone away, and tariffs are likely to add more heat in the months ahead. With wages and job growth softening, families should be proactive. Here’s what you can do to make smart moves with your money:

Budget proactively: Track which categories are rising fastest (food, housing, durable goods). Be prepared to make changes to your spending or look for cheaper alternatives where you can.

Protect savings and income streams: Inflation hurts purchasing power. Investing in inflation-protected assets, such as gold or oil, can help you hedge.

Watch for policy changes: The Federal Reserve is caught between cooling the labor market and avoiding further price gains. Keep your eyes on any policy changes, since interest rate moves or more tariffs could mean rapid changes.

Don’t dismiss inflation warnings: Just because the forecast fell short this time, it doesn’t mean that inflation isn’t creeping up under the surface and waiting to pop.