The world’s trade and macro wonks have a new and exciting drama to watch. When will the Trump tariffs hit American consumers with higher prices? Will tariff inflation be like the poet Richard Armour’s description of shaking a ketchup bottle, “None will come, and then a lot’ll”? Or will it be Samuel Beckett’s Godot, always expected but never arriving? Will the Supreme Court, like a disinflationary vigilante posse, head off price rises at the pass by gunning down the tariffs as unconstitutional?
Economics aside, tariff inflation may not be Trump’s biggest political worry. Currently the most salient price rises are in a domestically produced service, electric power. Trump may be less responsible for inflation in services than in imported goods, but as Joe Biden could tell you about the price of eggs, being provably at fault isn’t always necessary to incur political damage.
So far, according to analysis by the economists Alberto Cavallo, Paola Llamas and Franco Vázquez based on a tariff tracker of prices, the tariffs haven’t had much inflationary impact. Compared with a year ago, consumer prices of imported goods are only a fraction higher than those produced domestically, much lower than the rise in tariff revenue. Since exporters’ prices haven’t fallen much, US companies in the domestic supply chain are evidently absorbing most of the tariff hit.