Best Hedges for Inflation & New Tariffs: Why TIPS Struggled

Wait, how did TIPS lose money in 2022 with inflation raging?

Wait, how did TIPS lose money in 2022 with inflation raging? Short answer: because inflation hedges don’t just trade on inflation, they trade on rates and risk, too. It’s messy. I’ve spent two decades watching “obvious” hedges disappoint at the exact moment people expected them to be automatic winners, and 2022 was the poster child.

Here’s what actually happened. Headline CPI was hot, June 2022 hit 9.1% year-over-year (BLS). Yet TIPS funds fell hard because real yields jumped. The 10‑year TIPS real yield went from roughly -1.0% at the end of 2021 to about +1.5% by late 2022, a swing of ~250 bps. When real yields rise that fast, TIPS prices drop, same bond math as any Treasury. The big TIPS ETF (iShares TIP) finished 2022 down around 12% on a total return basis, and long-duration TIPS funds were hit much harder (think -30% to -35% territory). I started to type “duration convexity” here, but the plain-English version is: longer TIPS are extra sensitive to rate moves, so they got whacked.

Data reality check (2022): CPI peaked at 9.1% YoY in June; 10y TIPS real yield rose ~250 bps during the year; TIP ETF returned roughly -12%.

Now layer in tariffs. Many folks assume tariff shocks get absorbed overseas. The research says, yeah, not really. Work from 2019-2020 (for example, Amiti, Redding, and Weinstein, 2019; and Fajgelbaum et al., 2020) found near-100% pass-through of U.S. tariffs to U.S. importers/consumers. The U.S. imposed tariffs across roughly $300-$370 billion of Chinese goods between 2018 and 2019, and the price effects largely showed up in U.S. landed costs and retail prices. In other words, the costs didn’t magically vanish offshore.

My take, and it’s just that, a take: hedging inflation + tariff risk is about hedging the drivers, not the headline. In 2022, the driver was a violent repricing of real rates, which overwhelmed the CPI uplift inside TIPS. With tariffs, the driver is pass-through into input costs and margins, often filtered through the dollar and your specific supply chain. And markets are doing this again this year in spots, rates are still volatile in 2025, and every tariff headline gets picked up first in FX and sector margins before it trickles into CPI, which arrives late.

So before we build a plan, reset the expectations:

• Rates matter as much as inflation levels. If real yields rise, TIPS can lose money even when CPI is high.
• Tariff costs pass through. 2019-2020 papers show near-100% pass-through to U.S. buyers; don’t count on foreign producers to eat it.
• Hedge the drivers, not the headline CPI. That means targeting rates (duration), input costs (commodities/supplier terms), FX (dollar sensitivity), and margins (pricing power, contracts), not just buying “an inflation thing” and hoping.

We’ll keep it practical, because the goal isn’t to be right in theory, it’s to hold onto P&L when rates jump, tariffs bite, and your procurement team calls you on a Friday at 4:37 pm, ask me how I know.

What’s actually changing prices now (and why tariffs pile on)

Here’s the 2025 setup: services inflation is still the swing factor. Goods prices are bouncing around with supply-chain noise and tariff headlines, but your month-to-month “why is this still expensive?” feeling is coming from services, insurance, healthcare, travel, dining, car repairs, the stuff you can’t click-and-ship. Goods disinflated hard in 2023-2024 when freight and inventories normalized, then flattened out; services rolled slower and stuck. That’s the piece the Fed keeps staring at, and so do I.

Two things are intersecting: services stickiness and tariff adjustments that started last year and are still rippling through costs this year. The U.S. raised Section 301 tariffs on select Chinese categories in 2024, this is not theoretical:

• EVs: tariff increased to 100% in 2024 (from 25%).
• Solar cells/modules: lifted to 50% in 2024.
• Lithium-ion batteries: EV batteries moved to 25% in 2024; other Li-ion categories step up toward 25% on a staggered timetable.
• Semiconductors: slated to reach 50% by 2025 under the announced schedule.
• Steel/aluminum: at least 25% for targeted lines.

Mechanically, tariffs usually lift input costs first, then squeeze margins for import-heavy sectors. We saw in the 2019-2020 literature on earlier Section 301 rounds that pass-through to U.S. buyers was near 100%, import prices rose essentially one-for-one with the tariff; foreign producers didn’t eat it. It still takes time to show up in CPI (goods subcomponents react, services not so much), and the FX backdrop can offset or amplify moves (a stronger dollar softens the blow, weaker dollar makes it worse). Timing? Often 3-6 months for purchase orders and inventory cycles to flush through; sometimes longer if there’s hedging or long-dated contracts.

Why this matters for your portfolio and your budget, because it hits both:

• Import-heavy sectors (big-box retail with China-heavy categories, consumer electronics, solar installers relying on modules) face margin pressure unless they reprice quickly. Watch gross margin guidance; you’ll see the tells.
• Domestic substitutes and upstream producers can benefit: U.S. steel mills, North American battery materials/processors, utility-scale solar hardware made outside the tariff lines, specialty machinery. Not universally, but the skew is there.
• Autos/EVs: direct imports from China get priced out with 100% tariffs, but the cost story slips in through batteries and components at 25%. Expect more trim-level price dispersion and incentives games rather than clean CPI prints.
• Services still dominate your cash flow: insurance (auto/home), medical services, housing-related fees, these set the floor for your monthly burn. Tariffs don’t fix that; they add noise on top.

Where I net out, today, in Q4, goods inflation reacts to headlines and freight, while services keep the baseline firm. If freight rebounds or the dollar weakens, goods can re-accelerate; if not, they chop sideways. Tariffs are the additive: not a one-off CPI spike, more like a slow leak into costs that procurement teams haggle over. I literally had a client in July say, “we’ve got 180 days of contracted pricing, after that it’s a re-rate,” which is exactly how it spreads.

Portfolio takes (and yes, I’m thinking out loud):

• Tilt toward pricing power in services and away from volume-dependent importers that can’t pass through quickly.
• Mix in domestic upstreams that become relatively cheaper post-tariff. Don’t overpay for the theme; check capacity and backlog.
• For rates risk, keep some duration hedges because if services stays sticky, real yields can grind higher and smack anything long-duration, TIPS included if breakevens don’t move.
• If you run a budget, assume a staggered uplift: 0-1% on certain goods baskets over two quarters feels reasonable; services creep continues regardless (annoying but real).

Tariffs don’t “cause” a services problem; they stack on top of it. You feel it first in P&L, then, late, in CPI categories people argue about on cable news.

Small aside, I keep a sticky note that says: “watch FX, watch freight, watch margin guides.” Silly, but it stops me from chasing the wrong chart; the pass-through lives there, not in the headline number we all quote at meetings.

Your sturdy core: cash yields, TIPS, and I Bonds (used the right way)

If you want a hedge stack that aims at purchasing power without betting the farm on any single macro narrative, start boring: cash-like Treasuries, a TIPS ladder, and I Bonds. Boring is good. It’s the part of the portfolio that should not need a pep talk at 2am. My take: with real yields positive this year, you’re paid to keep duration short while you set up the longer-dated inflation protection on your terms.

Cash and short bills. Money markets and T‑bills are pulling real weight in 2025 because policy rates are still high relative to inflation. Keep the duration short, think 4-26 week bills, so a rate surprise doesn’t smack you. The U.S. Treasury auctions 4-, 8-, 13-, 17-, 26-, and 52‑week bills on a rolling schedule, which lets you roll maturities monthly or even biweekly. A practical note: money market fund yields exceeded 5% for much of 2023-2024 when the Fed was at peak restrictive settings (data in those years was pretty clear), and while the exact print moves around, the idea stands, short still works when real yields are >0. Keep it simple: ladder the next 3-6 months and refill as maturities hit.

TIPS (done as ladders, not a blob). TIPS protect purchasing power, but only if you control when the real cash flows arrive. Funds can add duration risk that overwhelms the benefit when real yields rise. For context, the popular iShares TIP ETF carried an effective duration around ~6-7 years as of 2024, which means a 1% real-yield move can swing the price ~6-7%, not what you want if you needed spending money next year. A TIPS ladder solves this: buy specific maturities to match known real spending dates (college in 2029, retirement income 2032-2042, etc.). You get CPI adjustment plus a known real yield locked at purchase. Yes, it’s a bit of admin. But matching liabilities beats guessing the path of breakevens. Also, remember taxes: TIPS interest and inflation accretion are taxed federally each year, and exempt from state and local taxes (that “phantom income” line item is annoying; plan cash to cover it).

Series I Bonds (long-duration, tax-deferred sleeve). I Bonds give you CPI-linked accrual with tax deferral, no state income tax, and there’s a firm purchase cap. As of 2024 policy: $10,000 per person per calendar year via TreasuryDirect, plus up to $5,000 via a federal tax refund. You can’t trade them, you can’t buy unlimited, and the first 12 months are illiquid (and you forfeit 3 months of interest if redeemed in years 2-5). But that’s the point: it’s your slow-cook, real-value bucket. I treat I Bonds like the “forever pantry”: not thrilling, always useful. Small personal note, I’ve bought them automatically every January; feels quaint, but the habit builds a real CPI-linked base over a decade.

Put it together: a simple barbell.

• Front bucket: 3-6 months of expenses in T‑bills/money market for flexibility and to capture current real yields. Keep average maturity under 6 months to cut rate-shock risk.
• Back bucket: a TIPS ladder mapped to specific real spending needs (e.g., tuition in 2029, 2031, 2033; retirement years 2035-2045). This is your inflation-indexed paycheck.
• I Bond sleeve: max the annual allotment ($10k per person; rule from 2024 still applies) for tax-deferred, CPI-linked ballast you don’t need to babysit.

This is a hedge, not a hero trade. If services inflation stays sticky and real yields grind higher, your short bills reset up while the TIPS ladder still meets real dates. If growth softens and rates fall, your ladder gains and bills roll down, either way, you’re defending purchasing power without guessing the headline CPI path.

Over-explained, yes, but the point is simple: keep the cash short while real yields are positive, use TIPS for date-certain real income, and let I Bonds quietly compound in the background. That’s a core I’m happy to carry into year-end.

Real assets without the headache: commodities, energy, and a splash of gold

Tariffs don’t create inflation by themselves, but they redirect it, into input costs, into freight, into replacement capex. That’s where broad commodities still earn their keep. A diversified basket across energy, metals, and agriculture tends to respond when input costs jump. Keep it small, think 5-10% of the total portfolio, so you get the hedge without turning your P&L into a commodity shop. I size closer to 7% when tariff rhetoric is heating up like it is this fall, then pare it back when supply chains calm down.

Two sectors do the heavy lifting in tariff and reshoring cycles: energy and industrial metals. Energy is the transmission mechanism from geopolitical risk to prices. Industrial metals, copper, aluminum, steel proxies, are the build-out barometer for onshoring, grid, and AI-data-center spend. Agriculture can hedge grocery pain, but it’s weather-driven and noisy; El Niño/La Niña flips matter more than tariff headlines most weeks. So I treat ag as part of the basket, not a standalone bet.

One quick framing that actually matters for results: the index you pick. The S&P GSCI is energy-heavy (energy commonly sits near 55-65% of weight under its production-weighting rules), which makes it punchy when oil curves spike. The Bloomberg Commodity Index (BCOM) spreads risk more evenly, about one-third each across energy, metals, and ag with sector caps; it currently holds 20+ contracts (BCOM methodology includes 24 commodities). Translation: GSCI = higher beta to oil; BCOM = smoother ride across inputs.

On gold, yes, it’s not CPI in a box. It does, however, hedge policy and geopolitical risk. Case in point: gold set a fresh nominal high above $2,450/oz in April 2025 (LBMA/COMEX prints), even with real yields positive. That’s the playbook: when policy credibility gets questioned or the geopolitical tape gets shaky, gold catches a bid. I treat it as an insurance sleeve, not a core income asset: 2-5% is plenty for most balanced portfolios. And no, it won’t reliably track your grocery bill; it’s there for the fat-tail days.

Futures-based funds come with their own quirks, roll yield and contango. When curves are upward sloping, rolling front-month futures can bleed carry; when they’re backwardated, you get a tailwind. Fees matter because they stack on top of roll costs. You can find broad BCOM-tracking ETFs around ~0.25% expense ratios, while some GSCI-flavored funds sit north of 0.70%. Pick low-fee where you can and, more importantly, know the index’s roll rules (some use optimized or seasonal rolls to reduce drag). It’s not sexy, but that basis math shows up in your returns, year after year.

• Position size: 5-10% broad commodities; within that, keep gold at 2-5% as an insurance sleeve.
• Sensitivity: Energy and industrial metals are most tariff/reshoring-sensitive; ag hedges food inflation but expect weather noise.
• Index choice: BCOM = diversified (24 commodities, sector caps); GSCI = energy-tilted (~55-65% energy).
• Costs: Prefer low-fee structures (~0.25% exists) and understand roll methodology to avoid avoidable drag.

I know, this sounds a bit fussy, pick a basket, keep it modest, mind the roll. But that’s the point: it’s a hedge, not a hero trade. You want the shock absorber when tariffs or geopolitics bite, without waking up owning an oil company by accident.

Equity tilts for a tariff-heavy world: pricing power wins

When tariffs raise input costs and snarl supply chains, the cleanest equity edge is simple: own businesses that can pass costs through without losing customers. That starts with proven pricing power and fat gross margins. Think category leaders in consumer staples and software with baked-in escalators. Quick markers: Adobe’s FY2024 gross margin ran about ~87%, and Microsoft’s sits near the high-60s overall, which gives them room to absorb higher vendor prices or FX/tariff friction without cratering earnings. On the staples side, the big brands have shown it already, Procter & Gamble pushed multiple price rounds in 2022-2024 and expanded gross margin back toward ~50% by FY2024, even with mixed volumes. And no, not every brand can do this; private label bites at the edges. But the leaders tend to stick the landing.

Tariff mechanics matter. The U.S. still has Section 232 tariffs of 25% on steel and 10% on aluminum in place since 2018, with country-specific quotas layered on, and in 2024 the USTR raised Section 301 tariffs on targeted Chinese goods, EVs to 100% in 2024, solar cells/modules to 50% in 2024, and certain semiconductors stepping up to 50% by 2025. That pricing umbrella is not theoretical. It shifts relative economics in favor of domestic producers across protected categories. Translation: U.S. flat-rolled steel, select aluminum producers, niche machinery, and grid/energy infrastructure suppliers get a cleaner runway when imports get pricier or capped.

And this is where the “boring but good” stuff lives. Grid hardening and reshoring are still running this year. The Infrastructure Investment and Jobs Act money keeps hitting backlogs, while onshoring of electronics, EV supply chain components, and industrial parts hasn’t exactly slowed. Engineering & construction, testing/inspection, and logistics firms with high domestic exposure keep winning RFPs. If you want a blunt proxy: companies with overwhelmingly U.S. revenue bases sidestep tariff math entirely. Historically, S&P 500 companies get roughly 40% of sales from abroad (FactSet 2023 foreign revenue study), while Russell 2000 names are closer to ~20% foreign, meaning ~80% domestic. That revenue mix lowers FX and tariff headline risk, even if operating execution still matters a ton.

Two filters help me narrow the list when I screen on Mondays: gross margin and contract structure. Software with CPI-linked or fixed annual escalators and high net retention can push 5-7% price increases through without drama; a lot of enterprise contracts literally specify it. Niche industrials with replacement parts or consumables, where downtime is the enemy, also have pricing use in the 3-6% range annually, especially when supply is tight. I know, I’m glossing over the ugly procurement cycles. But the point stands.

Valuation and balance sheets are the catch. In inflationary pulses, value and dividend growers have historically held up better than long-duration growth. One long sweep: from 1973 to 2022, dividend growers/initiators returned ~10.2% annualized versus ~6.6% for the broad market and negative returns for dividend cutters (Ned Davis Research). And when rates back up, like we saw again earlier this year, expensive, cash-flow-out-in-the-future stories wobble. You don’t need to dump quality growth; just avoid paying 30x for 10% growth with no buyback capacity and a thin interest-coverage ratio. Simple, not easy.

Where do tariffs meet margins on the ground? Domestic substitution. If EV imports face a 100% tariff and certain solar inputs face 50% (2024 USTR actions), U.S.-based component suppliers and logistics providers on those lanes get the incremental units. I’ve watched a mid-cap freight broker pick up share in exactly that dynamic, nothing flashy, just rerouted volume. It’s not linear, and yes, timing is messy around port inventories, but the earnings math is there.

• Favor: Consumer staples leaders with >35-40% gross margins; vertical software with 80%+ gross margins and CPI/fixed escalators; niche industrials with recurring parts/service.
• Benefit from domestic umbrellas: U.S. steel/aluminum, select machinery, grid/energy infrastructure OEMs and EPCs where import substitutes face 10-100% tariffs.
• Revenue mix: Tilt to small/mid caps with ~80%+ U.S. sales to mute FX/tariff shocks (Russell 2000 tends that way versus S&P 500’s ~40% foreign share).
• Quality/value bias: Prioritize dividend growers and solid interest coverage; be picky on long-duration multiples.

Confession: I got way too excited about a “cheap” exporter last year and forgot they sourced 60% of inputs from tariffed markets. Margins got pinched. Learn from my bruise, check the input bill, not just the end market.

Ah, and one thing I haven’t mentioned yet: watch working capital. In tariff up-cycles, inventories swell before prices reset. Companies that keep cash conversion tight usually signal they can pass price, not eat it. That’s your tell.

Practical tactics for households and business owners (yes, this week)

Keep it boring first. For near-term cash you actually need in the next year, payroll, taxes, tuition, lock it in with T‑bills and ladder 3, 6, 9, 12 months. Reinvest as each rung matures. Last year, 3‑month T‑bills averaged just over 5% in 2024 (FRED TB3MS hovered ~5.2-5.4%), which reminded folks why cash-like isn’t the enemy of returns when policy rates are high. Even if front-end yields drift lower later this year, a simple ladder keeps reinvestment risk manageable.

Next, map real liabilities. If you have predictable 3-10 year spending, lease build-outs, college, known capex, consider a TIPS ladder that matches those dates. Buy individual TIPS maturities in taxable or retirement accounts so your principal and coupons scale with CPI. Quick tax note: TIPS’ inflation accretion is taxable each year at the federal level (1099‑OID), but exempt from state and local tax. It’s “phantom income,” so hold enough cash to cover the bill. I Bonds are the cousin here: tax is deferred until redemption, and you’re capped at $10,000 per person per year electronically (plus up to $5,000 paper via a tax refund, per TreasuryDirect rules in 2024/2025). Different tools, same goal, preserve purchasing power.

If you import, the clock matters. Before tariff effective dates, price and pre‑buy critical SKUs you can actually store. And hedge FX. A simple 90-180 day forward on your main payables currency neutralizes the next container or two; on a $2 million CNY invoice, a 2% adverse move is $40,000, real money you can eliminate with one ticket. Also, when you renew supply or distribution agreements, negotiate CPI or PPI escalators (BLS CPI‑U or PPI for your category) so inflation or tariff pass-through doesn’t turn into your margin problem.

For investors, hedge input‑cost beta instead of guessing headlines. Pair retailers or consumer cyclicals with some commodity exposure so shocks offset. One practical combo: own the operator you like, then hold a modest sleeve of liquid commodity futures or options. Section 1256 funds and futures get 60/40 tax treatment, 60% long-term, 40% short-term, yielding a blended max federal rate of about 26.8% versus ordinary income rates, per current U.S. tax code. If you’d rather define max pain around tariff windows, buy put spreads into the announcement dates; you cap downside without torching all your carry.

Insurance and inventory, the unglamorous pair. Add business interruption and supply‑chain riders, read the waiting periods and named suppliers. And hold a touch more buffer stock for tariff‑sensitive parts. But run the carrying cost math: if your weighted cost of capital is 10% and warehouse/obsolescence runs ~3% annual, a 60‑day inventory bump costs roughly ((10%+3%) × 60/365) ≈ 2.1% of inventory value. Worth it if a 10% tariff hits next month? Usually yes; if not, don’t kid yourself. Been there, paid storage for “urgent” parts that weren’t.

Final tax hygiene: Section 1256 positions mark to market on Dec 31 automatically. TIPS pay taxable inflation accruals; I Bonds defer until you cash out; Treasuries are state‑tax exempt. And, one more nerdy thing, watch breakevens when sizing TIPS. The 5‑year TIPS breakeven sat near ~2.3% in September 2025 (Fed H.15 data), which is the market’s inflation guess. If your budget assumes 3%, owning more TIPS than nominals probably makes sense.

I try to stay humble here. Markets will make a fool of you right after you get loud. So pilot these changes, stage into ladders, hedge the next shipment, not the next decade, and review in January when the dust from Q4 promos and tariffs settles.

Tie it together: a simple playbook you can stick with

Here’s the short version so you’re not reacting to every tariff headline or CPI blip at 8:30am.

Core

• Short-duration Treasuries for real yield: Keep 6-24 months of operating/cash needs in a rolling T‑bill ladder. As of October 2025, 3-12 month T‑bills have been printing around ~5% in recent Treasury auctions (TreasuryDirect data). Even after 2-3% inflation, that’s a solid real yield with almost zero drama. I keep a simple 3‑, 6‑, 9‑, 12‑month ladder and roll it. Boring works.
• TIPS/I Bonds for long-term purchasing power: Use TIPS in retirement buckets and long‑dated liabilities. The 5‑year TIPS breakeven sat near ~2.3% in September 2025 (Fed H.15), and 5‑year real yields hovered around ~2% this fall. If your plan assumes 3% inflation, lean a bit more into TIPS than nominals. I Bonds for the tax deferral; I still like them even when the composite resets, it’s the fixed rate that matters over time.

Satellite

• 5-10% commodities/gold for cost-shock hedging: Keep it capped. I use 2-5% broad commodities plus 3-5% gold. Why? They’re blunt tools, but they respond when supply chains or tariffs bite. And, yes, they can be dead money between shocks. That’s fine.
• Equity tilts to pricing power and domestic beneficiaries: Overweight firms that can pass through costs (oligopolies, regulated utilities with trackers, sticky‑sub businesses). Add a modest tilt to domestically focused revenue if tariff risk stays elevated, think less FX exposure, cleaner margins. Don’t overfit last quarter’s winners; I’ve done that, it stings.
• Keep global diversification but hedge specific risks: Stay global, just hedge where the shoe pinches, FX for near‑term payables/receivables, or country ETFs where policy risk is immediate. You don’t need to abandon diversification to sleep at night.

Risk controls

1. Cap commodity exposure: Hard stop at 10% of the portfolio (inclusive of gold). No “just this one time” exceptions, that’s exactly when you’ll regret it.
2. Rebalance quarterly: First week of January/April/July/October. Use tolerance bands (±20% of target weight) to limit churn. And yes, rebalance even when it “feels wrong”, that’s the point.
3. Match hedge horizons to the risk: Months = T‑bills, near‑dated FX or input hedges. Years = TIPS, longer insurance (e.g., multi‑year supply agreements). Oversimplifying a bit, but it keeps the tools matched to the job.

Decision rules you can write on an index card

• If breakevens < your inflation assumption by ≥50 bps, tilt +5 pts toward TIPS; if the gap closes, revert.
• If tariff risk rises from rumor to filed proposal, raise commodity/gold sleeve to the top of its band (but not above).
• If cash needs < 12 months, extend ladder to 18-24 months only after a rate cut cycle starts, not before. My take: the carry is worth it once the Fed blinks.

You don’t need perfect timing, you need a sturdy process. Set it up now, then let compound interest and disciplined rebalancing do their thing. Markets will hand you false alarms; your rules decide what’s actionable.

Two honest caveats. One, this isn’t a magic shield, commodities can sag right before the shock, and TIPS can trade sloppy when real yields jerk around. Two, I might be over‑tidying a messy world here. But structure beats vibes, especially with tariffs in the news every other Wednesday. Review in January, compare against the 5‑year breakeven (~2.3% in Sep 2025 per H.15), and tweak without tearing it all up.

Frequently Asked Questions

Q: How do I hedge inflation and potential new tariffs right now without repeating the 2022 TIPS pain?

A: Two keys: control duration and hedge the drivers, not just the headline CPI. In 2022, real yields spiked ~250 bps and clobbered TIPS prices even while CPI ran hot, same bond math as any Treasury. So today I’d keep inflation hedges short: favor short‑duration TIPS (0-5 year exposure via a ladder or short TIPS funds) over long TIPS. Pair that with short Treasuries or T‑bills for rate shock ballast. For tariff risk (which research showed mostly passes through to U.S. prices), add a modest real‑asset sleeve, broad commodities or commodity trend/managed futures, 5-10% if your risk tolerance allows. On equities, tilt toward companies with pricing power (staples, parts of healthcare, some industrials) and away from the most duration‑sensitive growth names. Rebalance on a schedule, not on headlines. And if you’re in taxable accounts, mind the TIPS tax bite (the inflation accretion is taxable).

Q: What’s the difference between TIPS, I Bonds, and short‑term Treasuries if I’m worried about inflation and tariffs?

A: TIPS are marketable bonds whose principal adjusts with CPI; you get real‑rate exposure plus inflation accrual, but prices move with real yields, so if real yields jump (like 2022), prices fall. I Bonds are savings bonds with a fixed rate + semiannual CPI rate; they don’t trade, carry purchase limits, and can’t lose nominal value, great for individuals but illiquid in year 1 and capped on size. Short‑term Treasuries (T‑bills/notes under ~2 years) don’t hedge CPI directly but cut interest‑rate risk and give you current yield; they’re a good parking spot to pair with short TIPS so a rate spike doesn’t nuke your inflation hedge. Net: if you want set‑and‑forget inflation protection up to your annual limit, I Bonds are clean; if you need size, tradability, and portfolio integration, use short TIPS plus bills.

Q: Is it better to buy the big TIPS ETF or build a short ladder?

A: If you want to avoid a repeat of 2022’s drawdowns, a short ladder usually gives you better control. The broad TIPS ETFs often sit around intermediate duration, which got hit when the 10‑year TIPS real yield jumped in 2022 and the big fund finished roughly −12% for the year. A 0-5 year TIPS ladder (or a short‑duration TIPS fund) keeps your real‑rate exposure tighter and reduces price swings. Practical bits: hold TIPS in tax‑advantaged accounts if you can (phantom income is annoying in taxable); stagger maturities so something rolls every 6-12 months; and compare all‑in costs, ETF fee vs. bid/ask on individual bonds. If you don’t want the hassle, short‑duration TIPS ETFs are a fine middle ground.

Q: Should I worry about tariffs pushing up prices this holiday season, and what can I do in my portfolio now?

A: Short answer: yes, at least a little. Studies on the 2018-2019 tariffs found near‑100% pass‑through to U.S. importers/consumers, so higher landed costs tended to show up in retail prices. If new or higher tariffs land, it can be a near‑term inflation nudge. Tactically: 1) Keep your inflation hedges short (0-5 year TIPS, paired with T‑bills). 2) Add a small real‑asset sleeve (broad commodities or managed futures) to catch input‑price moves. 3) Tilt equity exposure toward pricing‑power sectors and value/quality, and keep ultra long‑duration growth in check. 4) For cash you need in the next 6-12 months, just use T‑bills or high‑yield savings, don’t force an inflation hedge on money that needs stability. And yea, don’t overtrade on headlines, set guardrails and stick to them.

@article{best-hedges-for-inflation-new-tariffs-why-tips-struggled,
    title   = {Best Hedges for Inflation & New Tariffs: Why TIPS Struggled},
    author  = {Beeri Sparks},
    year    = {2025},
    journal = {Bankpointe},
    url     = {https://bankpointe.com/articles/hedges-inflation-tariffs/}
}