The financial punditry are verklempt, puzzled and perplexed as the wholesale inflation rate calculated by the Bureau of Labor and Statistics Producer Price Index [DATA HERE] shows a drop in PPI of -0.1% for August.
Despite the pundits claiming the Trump tariffs were going to drive up prices, the data shows the manufacturers of products are absorbing the majority of the tariff costs, the importers are absorbing the remnants and the consumer prices are not reflecting the tariff. Go figure!
Exactly as expected, the wholesale price of tariffs are being offset by production cost reductions by the export dependent manufacturing companies overseas. This is exactly what took place in the first term, and the situation is duplicating even with higher tariff rates.
Export dependent nations are squeezing their own productivity, their governments are subsidizing the critical industries and the tariffs are being absorbed before they even leave the docks. This is the USA “rust belt” in reverse. The same scenario played out in the USA for decades as domestic manufacturers tried to retain U.S. industry. Now the foreign countries are experiencing their own economic squeeze.
(NEW YORK) – Wholesale prices unexpectedly fell in August as businesses ate the bulk of Trump’s tariff costs, teeing up the Federal Reserve to slash interest rates next week.
The Producer Price Index, which measures final demand goods and services prices, declined 0.1% in August from the month before – significantly below estimates of a 0.3% rise, the Bureau of Labor Statistics said Wednesday.
Excluding volatile food and energy prices, core PPI also fell 0.1% in August from the previous month. The core figure is up 2.8% on a yearly basis.
Easing from a heated 0.7% pace in July, the calmer wholesale reading signaled that companies have been absorbing the tariffs in an effort to hold onto wary customers. (more)
CNBC even stumbled upon what created the “rust belt” in the U.S. WATCH:
At a 55% tariff rate against Chinese finished-goods imports, there will be ZERO inflationary pressure to the U.S. consumer.
None. Zero. Zippo. Zilch.
First, the producing economies who are dependent on exports will fight to retain their manufacturing capacity by increasing productivity and subsidizing their industry. The production costs will be lowered at the point of manufacturing.
Second, tariffs are paid by the importer based on the *wholesale price* of the product as delivered by the exporting country depending on the exporters’ tariff rate.
Tariffs are NOT LEVIED/PAID based on the retail price of the product as sold to the consumer.
Example: A pair of Denim Jeans made in China for Guess Brand. The Chinese manufacturer sells the jeans to Guess Brand for $10 a pair manufactured. Guess sells the jeans at retail in the USA for $100 (a $90 gross profit).
A 50% tariff on China means the jeans cost Guess Brand $15 instead of $10 (an $85 gross profit). A 50% tariff on Guess brand jeans, that retail for $100, changes the cost to the retail brand by $5.
Multinational corporations who have off shored their production and manufacturing to China are the ones screaming about tariffs. Ultimately in the final analysis, President Trump is exposing corporatism, multinational corporate vultures; he is not necessarily just exposing China.
In the example above the company makes $85 gross profit as opposed to $90 gross profit on the pair of jeans if they do not raise the retail price.
They don’t raise the price because their profit margins are already ridiculous, and that’s why consumer prices do not go up. A 50% direct tariff on Chinese goods only marginally hits the multinational corporation.
American consumers need to understand this dynamic better.
Winnamins!
MSM:
“Damn! Trump was right AGAIN about tariffs and inflation.”
Hmmmm….
Next move:
“You are RACIST for saying a Black career criminal is a racist for singling-out and murdering a petite, innocent White girl!!!”
Then we all need to be louder. Why is it that the other side seems to have more conviction and bigger mouths?
Hmmm
They do have more convictions and if you notice, their mouths are always wide open, flapping their gums in unison with the media that lovingly amplifies their BS.
Wait!!What?? SD and DJT were right?? Exhaustion must be setting in from so much winning. As Peter,Paul and Mary said, when will they ever learn!!
Not going to be felt in Florida.
?
Rand Paul is taking this hard.
How is snake John Thune taking it.
Winnamins Thune ..
silly Senator
Consumers not feeling the tariff impact but someone is.
The UNIPARTY
They still refuse to admit that the President was correct, and they never will.
We in this house can avoid much of what is showing an inflation drop…
I’d like to see what the figure is with the two things we cannot…
Food and energy.
Agree. In my neck of the woods gasoline just took a substantial jump in price.
West Texas Intermediate is jumping today big time.
Our prices locally are all over the place…down-ish one day but not by much, then to the moon the next. Sometimes changing between morning and afternoon.
I won’t even begin to discuss food…
I went to Walmart to price shop on red meat today.
The rib eye steaks are $18.97 a pound.
A package with three on it, which is what we’d need to feed a family of four, with us splitting one to give the giant teenagers one each, was $60.02.
And yes, rib eyes are a better cut, but our teeth can’t take the lower quality cuts anymore..
I didn’t get it, I can’t afford that at all, we still need to eat for the rest of the week !!
If a person is making $14 or $15 an hour, they’d need to work over 4 hours just to afford this one package of meat for one meal. The rest of the days wages won’t fill their gas tank.
This is where it’s at today- and we wonder why birth rates are at historic lows.
I worry a lot about kids getting enough high quality protein with prices like this.
I don’t know if this is tariffs, price gouging or what, but I haven’t busted by ass for 35 years to live like this, this is for sure.
I agree that meat prices are high. My mom and dad raised three sons in the sixties and seventies and not one time did any of us eat a ribeye steak. Never. I didn’t know what a steak looked like until I went to work at a local IGA store when I was 15 years old.
Same here in NH.
My usual coffee, Bet
from about three weeks ago,
in one price change jumped 33% !
How does one say “gulp” in Welsh?
This will be a tough one. Sec. Rollins is not up to the task at hand. All in for big Ag. Need to do more to support small farms.
Squeeze them until they pop. You want access to the largest consumer market in the world, then you will pay for the privilege.
“American consumers need to understand this dynamic better.“
A shocking number of American consumers have spent the last roughly 25 years not even looking at the prices of things they buy. And not just wealthy Americans.
The Biden Regime inflation helped return some normalcy by forcing people to actually look at the blankety blank prices for a change.
I just dropped several hundred dollars repairing a 6-year old treadmill with 3,000+ miles on it. New belt was about $160. New controller about $300. Got the motor for free (lifetime warranty). Since it was fairly complex, I did the controller and motor, paid to have the belt installed and the machine calibrated. All in about $600.
The same treadmill, new? $2,700. A lot of people would just buy a new one and throw the old one away.
12 year old F150. 8 year old MDX. They run great and we take care of them.
We live in a throw away culture. We throw away stuff to buy new stuff. We throw away people. We throw away our industry.
The “American People”? You can’t fix 40-50 years of stupidity in a few months, not at the breakneck pace of our immigration-fueled IQ decline.
TLDR: Bring back shop class! LOL….good post Hokkoda and very true.
My British husband had a father who knew electrics, carpentry, and a real talent for repairing all and sundry from the smallest household items to cars as was necessary in a war ravaged and poor post WWII Britain. He taught him everything.
Add in all those classes in metalwork, woodwork, electrical, mechanical, plumbing, painting, construction, upholstering, wall papering, etc etc…there isn’t anything my husband can’t do and has done. He is an expert in all skills which have saved us I’m sure tens of thousands of dollars over the many years we’ve been married.
Bring it all back.
The sooner the better.
I agree, I have a 1939 General Electric refrigerator for my garage drinks, a 1940’s Sears Coldspot garage freezer for meat, a 2000 Crown Victoria auto for the beach and a 2005 F-250 4×4 black that I patch rust spots for back roads driving. Of coarse my wife drives a 2025 CT5 Cadillac…bill
I agree with what you are saying.
BUT lets also not underestimate the level of which we’ve been brainwashed into living this way.
We only learned the degree of how bad it’s been fairly recently.
We were taught not that long ago to go out there and shop, it’s good for our economy.
I’ll never forget Rudy, who I love, telling us all shortly after 9/11 to get out there and shop, go to dinner, get spending again to help in the recovery.
So yes, what you are saying is true BUT most people were also living the lives (participating in the economy) how our government set this all up for us.. (despite how we voted).
Turns out there is a boatload of hidden profit margins when a company uses slave labor.
You should hear the whining and carrying-on about the new tariffs from the hand knitting community. Many have become addicted to imported yarns, buying online and shipping under de minimis rules. They whine that several countries and online sellers have paused small shipments to the US. The sky has fallen!
gz9gjg: Same in the crafting and arts community, where a huge amount of stuff is shipped from China, using fake shipper addresses in the US. Plus, some small suppliers in Europe have suddenly been shut-off from shipping to the US. These are small businesses that do not realize they’ve been getting a free ride off American taxpayers.
Yes. Americans cannot compete against this corrupt system.
They make some excellent yarn up here in NH and VT locally to me, real wool.
Sheesh, it’s not like we don’t make good yarn in America.
You make the longest lasting and warmest socks available!
I remember California Joe screaming for months on end about how tariffs are going to be the death of all of us because American consumers are going to have to “eat” the cost of the tariffs.
Cal Joe refused to believe that the countries/businesses/industries who have been ripping off Americans would “eat” the cost of tariffs. They already had raised prices to Americans as far as they could.
Now, they eat the cost or else pass it on to all of the other consumers in the world who purchase their products.
“Tariffs” are a routine part of all international trade. Remember that, when Trump showed that “list of tariffs” with all those countries on it, these represented 50% of what the USA is paying(!) to those countries. Tariffs are a form of taxation which is simply part of “cost of goods sold.”
America’s mistake for a very long time is that it was paying tariffs, but not reasonably collecting them. Of course, every other nation was delighted at our ignorance . . .
I used to think that, maybe, our American leaders were willfully corrupt regarding tariffs but, now, I honestly believe that most of them are/were so economically illiterate (to the level of Rand Paul) that they just believed the lies of the “experts” who were probably paid by Chyna to spew the lies.
If not for PDJT then we would be economically and socially destroyed by now.
So how do we suppose the Supreme Court will rule on tariffs.
They’ve expedited the hearing.
Legal for foreign countries but not for the US?
Or are they going to rule tariff power comes from the Legislative branch and not the Executive…
Much hangs in the balance.
Ha ha. Unexpectedly. Ha ha. Rand Paul hardest hit. It was not unexpectedly for me.
“Wholesale prices unexpectedly fell in August as businesses ate the bulk of Trump’s tariff costs, teeing up the Federal Reserve to slash interest rates next week.”
The industry I work in a lot of products I purchase are from around the world. My business model is a distributor. I purchase and resell to my clients. Many of my suppliers are crying the blues about tariffs. This same industry went though the Covid supply chain issues and move a lot of their purchasing from China. Some to Vietnam some to Mexico etc. When I question the sales reps they are a bit defensive. They don’t known anything about what Sundance outlines above. I try to tell them, but they don’t know.
Most of what I see is a small amount of products are getting tariff up charges including inventory from Vietnam. I think like we have seen last time the hype about tariffs will die down people will get about doing and making money.
The problem I have now is I cannot unsee what has been going on for decades.
But God knows. God is hearing our prayers and I am very thankful for that.
I still have to whine about the quality of what I buy. Everything is junk. There is no choice. Clothing is all synthetic and looks secondhand on the rack. I don’t want many things, but I want to be comfortable in cottons. We used to have beautiful mohair sweaters and turn down cuff socks instead of these elastic banded things. Where did leather shoes disappear to? What do they with the hides now? Even name brands don’t stand for quality anymore.
Maybe, in a while, businesses that make those items will return to the USA and make quality goods again. Right now, the system is in an upheaval.
I would love to see Make American Clothing Great Again. That may encourage Americans to not wear their PJs, sweats, and shlumpy clothes in public.
Agree Diane.
I’m pretty frugal, I guess it’s how we’re made up here.
I like the buy the best I can afford so that I can hopefully not need to buy it again for a damn long time.
But I’ve noticed for a long time now that spending a lot of money doesn’t mean quality at all anymore.
I buy a lot of good stuff in thrift stores now, that solid decent stuff we made back in the 80s and even the 90s in some cases.
It’s far better than what is available today.
Here in upstate NY our prices are ridiculous due to a very stupid governor who is artificially keeping the prices high! How that imbecile thinks it helps her is beyond me!! 💁🏻♀️
Lot of perplexity going around. Scientists and doctors as well not too long ago!
Thanks solely to President Trump, America is collecting hundreds of billions of dollars in tariffs from foreign manufacturers. It only seems right that the American people share in a small percentage of that gain with a $600 per head tariff dividend that Mr. Trump mentioned. Putting the tariff windfall entirely toward the federal debt is a waste. The Democrats will only spend the money and balloon the debt once back in power. Please share a little with us. Stakeholders in America (citizens) deserve it.
prices unexpectedly fell … significantly below estimates
We need some new expectors and estimators.
Yes. These are the “supposed” experts. How can they be so horrible in their estimates again and again? And still keep their jobs, reputations, and credibility?
Guess jeans don’t go through a distribution channel?
QUESTION FOR SUNDANCE: many countries have sharply reduced small shipments to the US w the new small shipment fees.
WHAT IS GOING ON HERE??
TEMPORARY LAG? Are they unprofitable without our subsidies?
A couple hundred bucks of stuff did fall off the ship at the dock yesterday.
Didn’t a number come out last month that importer costs went up .3%? .3% is still low, considering tariffs over 100X that on some things. If I am recalling correctly, then both the importers and exporters are sharing in the tariff offset.
All the de minimis crap from the likes of Temu will substantially increase in price.
MAGA FABULOUS!!
Pass the Cheetos and Winnamins!!
👊👊🇺🇸🇺🇸❤️❤️🙏🏻🙏🏻
Keep in mind: corporations already charge the maximum price the think they can gouge from Americans and their margins remain so profitable, they can cut that profit by the total cost of the tariff and still make out like bandits.