Trump’s tariffs and the resulting price rise are now shocking economists and consumers alike. Despite all forecasts regarding the impact of tariffs, at this point there are few items that are actually more expensive due to Trump’s trade policy. It was expected that consumer prices would be widespread as import costs rise, but so far the impact of trade policy has been fairly limited.
How tariff impacts increase consumer costs and trade prices
Electronics shows a limited price increase from Trump’s tariffs
Federal Reserve Chairman Jerome Powell said Wednesday that prices have risen slightly as a result of tariffs that include electronics coming from China. He said that PCs and A/V equipment have become more expensive due to Trump’s trade war.
Research firm Telsey Advisory Group tracked 80 consumer items and discovered only 19 products that have been earning at prices since mid-April, but in reality, 16 items have fallen. Retailers are currently working through pre-Turfy stocks, so the inflation impact of tariffs has not actually been realized as expected.
Powell explained the timing issue:
“It is possible that items sold at retailers today were imported several months ago before customs duties were imposed.”
Car prices fall despite trade policy effects
Auto prices are against expectations and do not show a rise in prices from Trump’s tariffs in a surprising way. Prices for new cars fell 0.2% in May despite facing 25% tariffs and an additional fee for imported parts. The rising import costs have not yet affected the price of the vehicle. This is because the dealer still has pre-operated stock.
Edmunds’ Ivan Drury pointed out that dealers still work through pre-customer car supply.
The administration claims victory over the impact of tariffs on inflation
“We’ve seen a lot of effort into making it,” said Peter Navarro, White House trade advisor.
“They’ve all been trusted. What we got in the first semester (of Trump’s presidency) wasn’t the recession or inflation, but as we thought, we got price stability, robust economic growth and wage growth.”
Joseph Lavolguna, a Treasury official, said:
“Taxes are not shown in any data at all. The forecasting community is completely wrong.”
The administration points to current low inflation as evidence that Trump’s tariffs and rising prices do not cause the expected economic disruption.
Future consumer prices are expected
Economists warn Trump’s current stability regarding tariffs and price increases is temporary. Stephanie Roth, chief economist at Wolfe Research, was clear about the following facts:
“That’s not when, but when.”
Major retailers, including Walmart, Target and Home Depot, have announced that tariff pressure will raise prices. When the cost of imports rises, businesses ultimately end up giving the costs to consumers.
Powell agreed that the impact of wider tariffs will soon be upon us.
“We hope to see more of that over the summer. It will take time for tariffs to progress through the chain of distribution to the end consumer.”
Small and medium-sized enterprises currently face specific challenges due to these trade policy effects. Without a large supply chain, many have already begun cutting supply or increasing prices. American alternatives for foreign imports are often unavailable or too expensive.
Nuvo CEO Idd Malladi explained the situation.
“This is the early innings. No one wants to get out of the gate first. You don’t want to risk reputation damage to the brand, as increasing prices in this environment can leave the customer from you. Many people may eat margins for several months.”
At the time of writing, retailers typically hold inventory for around a month or two, so consumer prices could start soon. The April Supply Management Report shows that the prices paid by businesses have been the most increase since November 2022, and inventory has been contracted.
Powell confirmed that businesses expect to advance tariff costs.
“Many companies expect that all or all of the companies will place some of the effects of the tariff on the next person in the chain, and ultimately, consumers.”
The reality is that Trump’s tariffs have not caused a significant price rise so far, but warning signs suggest that the impact of major tariff inflation is approaching as pre-tax inventory runs this summer.
