Economists Say Inflation From Trump Tariffs Is Coming

As a shadow looms over American consumers, the financial landscape is beginning to shift in response to the sweeping trade policies implemented by President Donald Trump. These policies, which include hefty tariffs imposed on a variety of imports, are expected to have a significant ripple effect on prices across multiple sectors. Economist warnings indicate that the initial pangs of these economic adjustments are just the beginning, leading many to brace for increased costs in their everyday lives.

The Impact of Trump’s Tariffs

Despite the optimistic outlook from members of the Trump administration, who leverage recent positive economic reports as evidence that tariffs are functioning as intended, a growing chorus of experts contends that the impact of these tariffs is far from benign. They warn that the prices of everyday goods are set to rise, directly affecting consumers’ wallets. “It’s not surprising that tariff effects have not shown up strongly in official consumer prices yet,” noted an analysis from Goldman Sachs in early July.

Trump’s Economic Plan

The Trump tariffs, which were implemented in a staggered fashion, started in February with tariffs on various goods from China and non-USMCA countries, followed by steel and aluminum tariffs in March. However, the majority of the tariffs were rolled out between April and subsequent months. This staggered approach means that the consequences of these trade policies are only now beginning to manifest, many weeks after the tariffs were initially enacted. Economists have explained that the mechanisms behind rising prices are anything but simple. “Shipping takes time,” one expert explained. Sea cargo shipments may take weeks, if not months, to reach American shores, delaying the subsequent price adjustments. Once goods reach the U.S., there are further delays as products navigate through complex domestic supply chains — time that can ultimately translate to higher prices on store shelves for U.S. consumers.

Excess Inventory

In anticipation of potential disruptions from tariff announcements, many companies chose to stockpile import orders at the end of last year. This means that while many consumers may not yet feel the immediate effects of rising prices, a shift is inevitable as businesses work through their excess inventory. Not all costs are being passed to consumers immediately. According to a Goldman Sachs analysis, around 20% of tariff costs are currently absorbed by foreign exporters, while the remaining 80% is distributed between U.S. businesses and consumers. However, this balance may shift, as Goldman Sachs predicts that about 70% of tariff costs could eventually be passed on to consumers. Nicole Cervi, an economist from Wells Fargo, echoed this sentiment by noting that firms’ pricing power “is just getting a little weakened because consumer spending is starting to soften.”

The Consumer Price Index

Compounding these challenges is the seasonal nature of spending in the United States, where consumer focus shifts toward services during the summer months. Summer is typically characterized by travel and leisure expenses rather than consumer goods. As the year progresses into the back-to-school season and holiday shopping periods, the attention on goods prices will no doubt intensify. Tyler Schipper, an economics professor, cautions that “I think some of this might become more real for people” as the weather cools and household budgets adjust. The figures are already alarming. Reports show that certain high-demand items have seen significant price increases. The Consumer Price Index (CPI) from recent months indicates that appliance prices rose by 0.8% for both April and May, marking the highest growth in nearly four years. Similarly, toy prices have escalated, increasing 1.3% for the second consecutive month — an extraordinary jump considering their average stability in previous years.

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