The president wants US businesses to “eat” the costs of his tariffs. Fresh price growth data shows whether he is getting his wish.
The monthly inflation report scheduled for release Wednesday by the Labor Bureau of Statistics is expected to provide the most definitive look as to whether US companies are passing the costs of President Donald Trump’s higher import duties to customers.
And there is a prediction that inflation has been imposed. A research by Dow Jones Newswires shows that the consumer price index, which tracks changes in the prices of consumer goods and services, is projected to show a 12-month increase of 2.4% in May, compared to the annual pace of 2.3% in May.
“Core” inflation is a measure closely monitored by economists who rule out food and energy prices that tend to be more fluctuating, and is expected to increase by 2.9% per year from 2.8% in April. Monthly core reading was expected to rise to 0.3% from 0.2% in April.
The announcement of tariffs and trade deals that were not covered by the president fought over spending plans for businesses and consumers. As a result, sentiment investigations show aggravated credibility since April, when Trump rolled out his “liberation day” tariffs that reset the US basic import tax levels to 10%.
Trump has campaigned on the promise of bringing price relief to Americans, but economists say, by definition, his tariffs lead to rising prices.
As price pressures from tariffs begin construction, businesses are informing customers that they will pass higher prices, despite warnings that they will not.
Walmart said last month that consumers will soon begin to see higher costs. The National Federation of Independent Companies reported Tuesday that 31% of the members surveyed had planned to rise in prices last month from 28% in April.
“Walmart has announced that customers are beginning to see higher prices, and it highlights that businesses are actually beginning to feel this,” said Stephen Cates, financial analyst at Bankrate. “And when the biggest companies say this, smaller companies definitely feel that. There’s no way around that fact.”
Walmart responded to Trump’s threat by saying, “We’ll keep prices as low as possible as we can as we can give them the reality of small margins of retail.”
Price inflation has already collided with other parts of the economy. In May, the US factory registered the largest share of its price tax hike report since November 2022, said S&P Global, a group of data and business consulting firms last week.
And the companies cited in the Supply Management Institute’s latest manufacturing report said the president’s tariffs had wreaked havoc in their ability to plan for the future to address higher cost prospects.
If there was price relief, it would likely be the result of a slower overall economy, analysts say it would be a weakening of the labour market and force consumers to cut spending. As customers reduced travel, the pace of growth in airfares, hotels and gasoline prices fell in May, followed by new Bank of America data as there is data below the level seen before Trump took office.
Even if May’s price growth data is milder than expected, economists say past experiences suggest that the coming months will capture more fully the impact from tariffs. In a note to clients this week, an analyst at Pantheon Macroeconomics said it took three months for prices to rise from Trump’s 2018 washing machine tariffs, but when they did, the pass-through was “quick and complete.”
It suggests that it will take until July for most of the announced April to fully appear.
Even if the pace of price growth is no longer seen in 2022, Bankrate Cates said consumers will still remain wise when inflation reaches levels not seen in decades.
“It’s going to be a permanent itch that never goes away,” Cates said.