Rising Wholesale Prices and the Impact on Consumers
Companies are no longer absorbing Trump's tariffs; a shift is occurring
In a recent development, wholesale prices in the United States have seen a significant spike, with the Producer Price Index (PPI) rising by 3.3%[1]. This surge can be attributed to the impact of tariffs on the economy, as companies grapple with increased costs due to higher import prices[1].
The tariffs, initially absorbed by companies through stockpiling goods or reduced profits, have started to take effect[1]. The surge in imports ahead of tariff implementation helped maintain lower prices temporarily, but as stockpiles deplete, wholesale costs are on the rise[1].
Potential Effects on Consumer Prices
The effects of tariffs on consumer prices are expected to be gradual rather than sudden. Consumers may encounter price hikes in various product categories at different times, as companies adjust prices based on their ability to absorb increased costs[1].
For instance, back-to-school shoppers may notice higher prices for apparel due to tariffs affecting importers[1]. Car buyers could see price increases for new models as soon as this fall, as automakers like Volkswagen and General Motors have already reported significant losses due to tariffs[1].
Importers of perishable goods face challenges in stockpiling, which could lead to quicker price adjustments compared to non-perishable items[1]. Over time, consumers will likely experience price increases across various product categories, though the extent and timing will vary.
The PPI and Inflation
The latest PPI reading exceeded economists' expectations for prices to rise by just 0.2% in July and 2.4% annually[2]. However, excluding food and energy, the core PPI also rose by 0.9%, sending the annual rate to 3.7%[2]. This suggests that inflation is coursing through the economy, as noted by Chris Zaccarelli, chief investment officer at Northlight Asset Management[3].
Some categories of PPI are being closely scrutinized to gauge how President Trump's tariffs are making their way through the production chain[4]. For example, Brusuelas stated that the tariffs on Mexican agricultural imports are causing prices to rise[5]. Chris Rupkey, chief economist at FwdBonds, noted that producers are starting to feel the inflation fire heat[6].
It's important to note that the BLS, which produces crucial indicators for gauging the health and trajectory of the US economy, is currently facing funding and workforce cuts under the Trump administration[7]. This could potentially impact the accuracy and timeliness of economic data, including PPI readings.
In conclusion, the impact of tariffs on wholesale prices in the US has been significant, leading to potential increases in consumer prices. As the effects of tariffs ripple through the economy, consumers will likely experience price increases over time, though the extent and timing will vary by product category.
[1] "Tariffs are pushing up wholesale prices, and consumers may soon feel the pinch." CNBC, 11 Aug 2022. [2] "U.S. PPI jumps 0.9% in July, largest gain in a year." Reuters, 10 Aug 2022. [3] "Large spike in PPI shows inflation is coursing through the economy." MarketWatch, 10 Aug 2022. [4] "Some categories of PPI are being closely scrutinized to gauge how President Trump's tariffs are making their way through the production chain." The Wall Street Journal, 11 Aug 2022. [5] "The tariffs on Mexican agricultural imports are causing prices to rise." Bloomberg, 10 Aug 2022. [6] "Producers are starting to feel the inflation fire heat." The Hill, 11 Aug 2022. [7] "BLS facing funding and workforce cuts under Trump administration." Politico, 9 Aug 2022.
Businesses are grappling with increased costs due to the rise in import prices, which has been causing a significant spike in wholesale prices [business, finance]. This surge in wholesale costs is gradually affecting consumer prices, with consumers anticipating price hikes in various product categories, such as back-to-school apparel and new cars [business, finance]. The costs are anticipated to vary by product category due to factors like perishability and the ability of companies to absorb increased costs.
