Trump’s Tariffs & Inflation: Why Prices Haven’t Spiked Yet (2024 Update)

ByPasarextra

Trump’s Tariffs & Inflation: Why Prices Haven’t Spiked Yet (2024 Update). Economists and businesses have long warned that President Trump’s tariffs would lead to higher consumer prices, but recent inflation data tells a different story. Despite expectations, May’s inflation report remained subdued, raising questions: When will tariffs impact prices—and why hasn’t it happened yet?

Key Inflation Findings: May 2024

  • Year-over-year inflation: +2.4%
  • Month-over-month increase: +0.1% (below forecasts)
  • Mixed trends: Prices rose for appliances, car parts, and audio equipment but fell for new cars and apparel.

Why Haven’t Tariffs Driven Prices Higher?

  1. Weak Demand: Businesses may lack pricing power due to softer consumer spending.
  2. Inventory Stockpiling: Companies imported goods early to avoid tariffs, delaying price hikes.
  3. Delayed Effects: Historical data shows tariffs take 3+ months to visibly impact inflation.

Where Tariffs Are (and Aren’t) Showing Up

  • Auto Sector: New car prices dropped in May, but Ford and other automakers plan increases by mid-2024.
  • Retail: Walmart signaled impending price hikes—a potential bellwether for broader inflation.
  • CPI Forecasts: Analysts expect core CPI to rise to 3.7% by late 2024 if tariffs persist.

Underlying Economic Risks

  • Labor Market Slowdown: Hiring has cooled, but layoffs remain low.
  • Consumer Strain: Rising credit card delinquencies suggest households are tapped out after pandemic savings dried up.
  • Corporate Margins: Firms can’t absorb tariff costs forever—price hikes seem inevitable.

What’s Next for Inflation & the Fed?

  • Summer 2024 will be critical: If price increases stay mild, the Federal Reserve may shift focus to economic growth over inflation.
  • Stagflation Fears Overblown? For now, the data doesn’t support a 1970s-style crisis.

Key Takeaways

  • Tariff impacts are delayed, not dead.
  • Inflation could accelerate in late 2024, especially if U.S.-China trade tensions escalate.
  • Retailers like Walmart will be early indicators of broader price trends.

Bottom Line: The economy remains in a holding pattern. While tariffs haven’t yet triggered a price surge, businesses and consumers should brace for higher costs by late 2024.

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