Prices, inflation of the trade war impact as “fairly ugly” in summer

The impact of President Donald Trump pricing and the resulting trade war will result in higher consumer price In summer, economists said.

“I suspect by May – certainly by June, July – Inflation statistics will be quite ugly,” said Mark Zandi, chief economist of Moody's.

Prices are a tax on imports, paid by American companies. Importers to transmit At least some of these higher costs for consumers, economists said.

While economists debate if the prices will be a punctual shock or something more persistent, there are few arguments of consumer portfolios will take a hit.

Consumers will lose $ 4,400 in purchasing power in the “short term”, according to a Yale budget laboratory analysis of the pricing policy announced on Wednesday. (It does not specify a delay.)

Federal inflation data does not yet show a lot of prices, said economists.

In fact, in a “darkly ironic” way, the specter of a world trade war may have had a “positive” impact on inflation in March, Zandi said. Oil prices have strangled In the midst of fears of a global recession (and a decline resulting from the demand for oil), a dynamic that filtered Reduce energy priceshe said.

“I think it will take a while for the inflationary shock to be done in the system,” Preston Caldwell, chief economist in the United States in Morningstar, said. “At the beginning, (inflation data) could be more beautiful than it will eventually be.”

But consumers will start to see significantly higher prices by May, if the president maintains the pricing policy in place, said Thomas Ryan, economist in Capital Economics.

“Price increases take time to filter the supply chain (starting with producers, then retailers / wholesalers, and finally consumers),” Ryan wrote in an email.

Capital Economics expects the consumer price index to peak around 4% in 2025, compared to 2.4% in March. This peak would be roughly double what the federal reserve aims in the long term.

Food will probably be among the first categories to see prices increase, said Zandi.

Since many food products are perishable, grocers cannot keep to provide a very long time. This accelerates the highest costs for consumers, he said.

In comparison, other retailers can sell the old inventory seated in their warehouses which had not been submitted at prices, said economists. This dynamic would delay the impact of prices for consumers, economists said.

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Most physical products, such as vehicles, consumer electronics, clothing and furniture, should be more expensive by Memorial Day, Zandi said.

In addition, retailers and wholesalers “will not want to do it at the same time,” said Ryan.

They will probably sprinkle higher prices over time to dull consumer reactions, said Ryan. Consumer prices “will more reflect the real impact of prices” in May and beyond, he said.

There is also the possibility that certain companies can try to deal with the advance of prices by increasing prices now, in anticipation of higher costs, said Ryan.

It would be a bet for companies to do so, however, said Caldwell.

“Any company that comes out first of all its neck and will increase prices will probably be subject to political boycotts and unfavorable attention,” he said. “I think companies will move slowly at first.”

There is great uncertainty about the ultimate scope of President Trump's pricing policy, economists said.

Trump fell on Wednesday from the imposition of steep prices on dozens of business partners. Kevin Hassett, director of the National Economic Council, said on Thursday that 15 countries had made commercial offers.

For the moment, all American trade partners are still faced at a universal tariff of 10% on imports. Exceptions – Canada, China and Mexico – face separate samples. Trump expressed a total of 145% on Chinese goods, for example, which is a “de facto embargo,” said Caldwell.

Trump has also imposed specific prices for aluminum, steel and cars and car parts.

There is the possibility that the prices of services such as travel and entertainment will decrease if other nations retaliate with their own commercial restrictions or if there is less foreign request, said Zandi.

There was evidence of this in March: a drop in “steep” decreases in the prices of hotels and prices of airlines in March data on the IPC reflects the recent decrease in tourist visits to the United States, in particular Canada, according to a note Thursday of Capital Economics.