Latest Inflation Numbers and Discussion

[jim584672]

Tariffs are a huge tax increase on the lowest income rungs of society. Prices have to go up.

https://www.bloomberg.com/news/articles/2025-03-04/target-sees-flat-sales-this-year-warns-of-risk-from-tariffs

Target, Best Buy Warn US Consumers of Tariff Price Hikes
SNIP: "Target Corp. and Best Buy Co. warned consumers to expect higher prices as a direct result of the tariffs US President Donald Trump imposed on Mexico, Canada and China overnight.
Target Chief Executive Brian Cornell said its shoppers would likely see price hikes in its stores “over the next couple of days,” in a CNBC interview on Tuesday, just hours after the tariffs went into effect.
Among the first comments on tariff impact from a major US retailer, Cornell said the company has done a lot of scenario planning on goods like fruits and vegetables, a “significant amount of which” comes from Mexico during the winter, he said.
“We’re going to try to make sure we can do everything we can to protect pricing. But if there’s a 25% tariff, those prices will go up,” he said."

 

[G POP]

You don't like to hear the facts repeated to you, huh? lol What you stated was not factual, and I could provide many references that tariffs cause inflation, and it seems more people support my view than yours.

One of many examples: A Goldman Sachs analysis in May 2019 found that the consumer price index (CPI) for tariffed goods had increased dramatically compared to a declining CPI for all other core goods

You are making Montecfo's point for him. His point, I believe, is that tariffs by themselves DO NOT raise overall inflation. Only inflation on the actual tariffed goods. That's exactly what your Goldman Sachs analysis says.

 

[explanade]

A lot of the complaints about inflation isn't just continual price rises but the accumulated effect of price rises over a period of time and those higher prices sticking.

So from that standpoint, even if tariffs cause price to rise once or twice, on top of normal inflation, the total increase in prices will be felt more acutely.

Plus the price increases due to tariffs could be a spike. If tariffs are 25% maybe not all of it is passed on right away but a bunch of spikes, like 4-5% 2 or 3 times.

 

[MMxyz74]

If the effects of these tariffs are similar to what happened during COVID, then businesses don't let a crisis go to waste without being rewarded. Everything went up during COVID - TT, milk, water(?) and has stayed higher.

Many years ago, when I had my own business, I recall someone asking me if I knew the first rule of business. I answered it was to make a profit. He said no, it's never trust a businessman.

 

[NomDeER]

Plus the price increases due to tariffs could be a spike. If tariffs are 25% maybe not all of it is passed on right away but a bunch of spikes, like 4-5% 2 or 3 times.

It could take a little while for us to see some of the increases. For example, if avocados are imported from Mexico today, that may immediately be reflected in the price of avocados. If farmers are paying tariffs on fertilizer and pesticides imported from Mexico or Canada or China today, it's possible that we might not see that reflected in prices until the crops using that fertilizer and pesticides are planted and harvested and then sent to market.

It also would take time to find or make substitutes for some imported goods that have tariffs. It is quite possible that prices will not come down even after substitutes are found. When the prices remain high, that is not "inflation," but I think a lot of people don't care about the label placed on that if they are still paying more than they used to pay and more than they can afford.

 

[ut2sua]

You are making Montecfo's point for him. His point, I believe, is that tariffs by themselves DO NOT raise overall inflation. Only inflation on the actual tariffed goods. That's exactly what your Goldman Sachs analysis says.

Bolded is mine. Translation likes this caused me to spill my morning coffee. If you reread your own statements, then inflation on the actual tariffed goods DO add to (raise) the overall inflation right? (the last part is just simple math)

 

[Koolau]

If the effects of these tariffs are similar to what happened during COVID, then businesses don't let a crisis go to waste without being rewarded. Everything went up during COVID - TT, milk, water(?) and has stayed higher.

Many years ago, when I had my own business, I recall someone asking me if I knew the first rule of business. I answered it was to make a profit. He said no, it's never trust a businessman.

Prices change behavior. In my case, I've essentially ceased eating out since the recent high inflation (followed by lingering high prices). It's not that I can't afford to eat out. I simply don't find the experience to be worth the cost. YMMV

 

[ut2sua]

Tariffs do not create ongoing inflation. They create a one time price change.

Masterful use of English here since it could be understood as price could go higher or lower (soften the impact significantly). I can learn from this. Next time I want to buy a new Porsche 911, I can tell DW that there will be a one time change in our brokerage account

 

[Koolau]

Masterful use of English here since it could be understood as price could go higher or lower (soften the impact significantly). I can learn from this. Next time I want to buy a new Porsche 911, I can tell DW that there will be a one time change in our brokerage account

I'll have to try that with DW for the C-8 I'd like to have. I'm guessing it won't w*rk but it might be worth a try.

 

[Montecfo]

No one suggests tariffs don't increase prices. They obviously can do this. BUT, they may not trigger a meaningful increase in overall inflation (which is what economists generally mean when they discuss inflation) because of substitution of goods and elasticity of demand. It may ALSO suppress reguar inflation, as suppilers subject to tariffs are reluctant to further increase a prices already hiked due to tariffs.

I observed that tariffs did not result in inflation when instututed in 2017. Most agree with this. That does not mean no price rose. It means that overall inflation (which is what economists generally mean when they discuss inflation) remained in check and well below the Fed's target.

Now, my larger point was that tariffs do not trigger ongoing inflation because inflation refers to an ongoing rise in overall price levels. A tariff sets a *one-time* change in a price, not recurring increases (but who knows? Perhaps monthly increases are next).

But this was not my original thought. It was pointed out in news reports, like this one quoting Fed governer Christopher Waller:

“My base-line view is that any imposition of tariffs will only modestly increase prices and in a nonpersistent manner,” Christopher J. Waller, the official, said in remarks at an event in Australia Monday evening. “So I favor looking through these effects when setting monetary policy to the best of our ability.”

I think the word "nonpersistent" is a key one there.

More from the article:

Mr. Waller acknowledged that the economic impact of the tariffs could be larger than anticipated depending on how they are structured and later put in place. But he suggested that any uptick in prices from tariffs could be blunted by other policies, which could have “positive supply effects and put downward pressure on inflation."

Can The Fed Look Past Trump's Tariffs?

Can the Fed Look Past Trump’s Tariffs?

Top officials are grappling with how to handle potential price increases caused by the administration’s policies.

www.nytimes.com

Now, I do not subscribe to the NYTimes but I am sure other outlets carried this or reported similar views.

Of course no one knows what will actually happen. These are all just opinions. But I think the view that tariffs are sure to create a wave of inflation is a bit simplistic which is why I said I have doubts. And I have explained why-as I think I did earlier in the thread.

I think it is a good discussion but one where there appears to be little certainty.

 

[explanade]

Difference between 2017-2020 and now is that these tariffs are higher and we no longer have a zero interest rate environment now.

 

[MichaelB]

I think it is a good discussion but one where there appears to be little certainty.

This is my view. It’s too early to determine how tariffs might impact inflation, and if so, by how much.

I think the only thing we can say with certainty is when prices rise for some goods, demand will shift toward other goods, and that is certain to happen now.

 

[Dtail]

Demand shifting to other goods could be one result but is certainly in many cases not a desired result.

 

[Montecfo]

Demand shifting to other goods could be one result but is certainly in many cases not a desired result.

Actualy, the goal is to make the non-tariffed goods more attractive so people buy them.

 

[Dtail]

Actualy, the goal is to make the non-tariffed goods more attractive so people buy them.

Meaning to artificially make the American product more desirable whether or not it is naturally a more desirable product.

 

[explanade]

Actualy, the goal is to make the non-tariffed goods more attractive so people buy them.

Meaning to artificially make the American product more desirable whether or not it is naturally a more desirable product.

Actually the US hasn't told Canada and Mexico what it exactly wants to not impose the tariffs.

President has also said that the auto industry can bring factories back to the US from Canada and Mexico if they don't want to pay tariffs for shuttling components back and forth across the borders.

 

[Koolau]

Actually the US hasn't told Canada and Mexico what it exactly wants to not impose the tariffs.

President has also said that the auto industry can bring factories back to the US from Canada and Mexico if they don't want to pay tariffs for shuttling components back and forth across the borders.

Well there has been an explicit demand to stem the flow of fentanyl. So there's that.

 

[Montecfo]

Meaning to artificially make the American product more desirable whether or not it is naturally a more desirable product.

Pricing is a bit more compicated than that. Many countries place tariffs on US goods but have enjoyed low to no tariffs going the other way. European auto indistry is an example.

Also, some countries subsidize favored industries to artificially reduce the price. China's steel industry is an example. Canadian lumber is another.

In both cases a tariff may be an attempt to level the playing field.

Of course tariffs are nothing new.

 

[ShokWaveRider]

Personally I think it is all just posturing, and absolutely no value for the country or it's citizens. JMHO, I may be wrong.

 

[Koolau]

Personally I think it is all just posturing, and absolutely no value for the country or it's citizens. JMHO, I may be wrong.

As the Zen Master says "We'll see." Let's check back in 6 months or a year. Hopefully things will be a bit clearer by then.

 

[GenXguy]

You are making Montecfo's point for him.

Let me quote Montecfo: "The tariffs which came in in 2017 did not trigger inflation."

I said the opposite. I could come up with loads of supporting evidence I was correct.

I saw on the news last evening that a new car could go up by as much as $12,000.

 

[tulak]

Idk about others, but I’m happy my eggs come from chickens in the US.

 

[braumeister]