Good morning. Donald Trump announced a trade deal with Indonesia yesterday. Indonesia will be hit with a 19 per cent tariff on exports to the US — the initial threat was 32 per cent — and in return it will buy American oil, aeroplanes and farm goods. This is the closest thing to a real agreement since the deal with Vietnam. But neither Vietnam nor Indonesia have confirmed Trump’s claims. Should we buy them? Email us: unhedged@ft.com. 

Inflation

Both headline and core inflation picked up in June. The core figure, the one we care about, rose from 2.8 per cent to 2.9 per cent. But the modest increase was about as expected.

Looking closely, though, the report provided solid evidence that tariffs are pushing prices up. Core goods prices rose 0.2 per cent, driven by household appliances, clothing and furnishings — the very categories that analysts have long predicted would show tariff inflation first. “Prices rose especially sharply for goods which are primarily imported, and less quickly for those that are mainly made in the US,” said Samuel Tombs at Pantheon Macroeconomics. This chart from Tombs shows price changes relative to import intensity, a measure of how much each class of good is imported from abroad: