The Term-1 effect of deflation created by tariff policy is resurfacing in Term-2 even with larger tariff impacts across the network of global manufacturing exports. [DATA SOURCE]
In essence, there is little to no end result in price increases in the final price of consumer goods (Consumer Price Index). In fact, there is a slight deflationary aspect on CPI data from imported durable goods. The lower price of arriving imported durable goods is effectively putting downward pressure on US consumer prices. This is identical to the Term-1 result. A pattern is repeating. [PCE personal consumption expenditure / CPI consumer price index]
[Source – WH Council of Economic Advisors]
It sounds counterintuitive, but tariffs do not impact the final price of goods to USA consumers; there are just too many factors, too many elements within the Total Cost of Goods (TCG) within supply chain. Global energy prices, domestic energy prices, currency evaluations and fluctuations, state/govt subsidies to manufacturers, labor negotiations and production profit offsets are only a few of the components.
Additionally, and this is where U.S. consumers do not get a fulsome explanation from corporate media analysts, the tariff rate is applied to the ‘cost’ the exporter pays, not the final consumer price. A pair of jeans from China may be sold to the import company for $5 per pair. A 30% tariff raises the price of the jeans by $1.50 to $6.50. The tariff rate does not apply to the retail price of $50 paid by the consumer.
