President Donald Trump’s tariffs have yet to manifest in traditional inflation metrics, as recent reports from the Bureau of Labor Statistics indicate modest price increases across various sectors. Excluding food and energy, prices were flat in May and up by only 0.1% overall. This figure was far lower than anticipated and underscored the complicated ways in which tariffs rippled throughout the economy.
Canned fruits and vegetables were up 1.9% in price. At the same time, roasted coffee prices experienced an even larger increase of 1.2%. Tobacco products were increased by 0.8%. Durable goods, a category of long-lasting items such as major appliances, posted an even bigger jump of 4.3%. The overall price for computers and peripheral equipment increased by 1.1%. These figures paint a complicated picture of pricing weft. They fail to account for the larger inflationary pressures we would expect from the tariffs.
The wholesale price measure, an important indicator of future consumer price trends, only rose by 0.1% in May, further complicating the narrative around inflation. This standstill continues despite companies already preparing for higher costs from the tariffs that President Trump imposed this past spring.
A number of factors have worked to produce this low-inflation backdrop. Companies have been stockpiling imported goods ahead of the April 2 tariff announcement, allowing them to buffer against immediate price increases. In addition, there is a very long lag time in how tariffs are ultimately passed through to consumers in the actual economy. Lastly, companies are up against a cost-cutting consumer as households squeeze their budgets — forcing share-sixing — the fuel for almost 70% of economic activity.
Luke Tilley, chief economist at Wilmington Trust, noted, “We have been of the position for a long time that tariffs would not be inflationary and they were more likely to cause economic weakness and ultimately deflation.” His opinion is a reflection of a dawning alarm among economists about the longterm fallout from this disastrous trade policy.
Aichi Amemiya, a senior economist at Nomura, similarly remarked on the muted impact of tariffs thus far: “We believe the limited impact from tariffs in May is a reflection of pre-tariff stockpiling, as well as a lagged pass-through of tariffs into import prices.” Our analysis further lends credence to the idea that short-term impacts are not yet apparent in retail prices to consumers.
Whatever the cause, current data paints a picture of very limited inflationary pressure. Yet, experts are calling for price increases over the next few months. Joseph Brusuelas, chief economist at RSM, emphasized this sentiment by stating, “This gain in appliance prices mirrors what happened during the 2018-20 round of import taxes, when the cost of imported washing machines surged.” His remarks add credibility to the idea that these tariffs will soon start to have greater impact on consumer prices.
Consumers, especially lower-income consumers, are already starting to tighten the purse strings on discretionary spending. That spending reduction on vacations, excursions, and restaurants indicates a change in economic sentiment. This behavior would likely speed up the rate that the costs of tariffs are absorbed into prices paid by consumers.
So economists, like most Americans, are keeping a close eye on these trends as they unfold. The months to come will tell us more about the extent to which tariffs are altering the economic landscape and pushing inflation higher. For now, it seems that traditional inflation indicators are not yet capturing the full impact of President Trump’s trade policies.