Mixed economic data reveals uncertainty about the impact of tariffs on U.S. prices. Although the consumer price index has increased, it remains below forecasts, while producer prices have surprised positively. Companies might currently absorb tariff costs, but longevity of this practice is questionable. Factors like seasonal price shifts, pre-tariff inventory effects, and a predominant service cost pass-through potentially explain muted inflation. Furthermore, actual tariff rates paid may be lower than stated due to changes in import sources. A Barclays report indicates the effective average tariff rate was lower than anticipated.
Despite this firmness, the tariff pass-through effect on consumer prices arguably has been less bad than expected so far," JPMorgan economists led by Michael Feroli said in a note on Friday.
According to the bank, one potential explanation for the muted inflation numbers is that firms are eating the tariff cost at the expense of their profit margins, which are currently wide by historical standards and can accommodate the added costs without harming capital or operating budgets.
Yet another explanation could be that the tariff rates importers are actually paying are far below the headline numbers.
A recent Barclays report found that the weighted-average levy in May was just 9% versus the bank's estimate for 12%.
Collection
[
|
...
]