Brace for Price Hikes: Understanding How Tariffs are Impacting Your Wallet, According to Economists | CNN Business

Economists and analysts have raised alarms about the impact of President Trump’s trade policies, particularly the heavy tariffs on goods imported into the U.S. They argue that this could lead to higher prices for consumers. Yet, recent economic data reveals that inflation has stayed relatively low for now.

Administration officials view positive economic indicators as proof that their tariffs are effective. However, many experts warn that rising prices might just be starting, hinting that the situation could worsen in the months to come.

Why Prices Might Rise

• Slow Implementation: Tariffs have been rolled out gradually. Initial waves began in early 2023, but many were introduced later, meaning the full effects are lagging.

• Changing Policies: Tariffs can be suddenly altered. This uncertainty leads to complications for businesses and consumers alike.

• Shipping Delays: Imported goods take time to arrive. Supplies can be delayed by weeks or even months.

• Complex Domestic Supply Chains: Imported goods often require additional processing before they reach store shelves, which can extend the timeline for price changes.

• Stockpiling Effects: Companies stocked up on inventory before tariffs were enforced. This means consumers might not feel the immediate impact of price hikes.

Economic Factors at Play

A recent analysis from Goldman Sachs suggests that while foreign exporters initially absorb some of the tariff costs (about 20%), the burden is likely to shift mostly to U.S. consumers over time. The expectation is that around 70% of tariff costs will eventually end up as higher prices for everyday goods.

Despite this, many businesses are reluctant to increase prices too quickly. Rising costs might clash with wary consumers who are already struggling with their budgets. “Firms are sensing that consumer spending is softening,” notes Nicole Cervi, an economist at Wells Fargo.

Interestingly, the effects of inflation are often more noticeable in fall and winter as families shift their spending habits toward goods that are significant during the holiday season. For example, household budgets become more focused on back-to-school and holiday shopping in these months.

Current Trends

Data from the Consumer Price Index highlights rising prices in specific areas. In May alone, appliances saw a 0.8% increase, and toy prices climbed as well. In fact, a recent analysis of 200,000 products from online retailers indicates that prices for home goods and furniture have been rising steadily since the beginning of 2023.

Karthik Bettadapura, CEO of DataWeave, highlights the unusual pace of these changes, predicting a broader “price creep” as tariffs continue to affect supply chains. This may even lead companies to shrink product sizes instead of raising prices outright.

Looking Ahead

As we move into the latter half of the year, experts anticipate that inflation rates could begin to rise. Wells Fargo predicts the overall Consumer Price Index (CPI) might peak at around 2.9%. Though the inflation impacts may be modest, they could have a significant effect on struggling consumers. “Right now, I’m less worried about runaway inflation,” says economist Tyler Schipper, “but the burden on consumers remains heavy.”

Without a doubt, the ripple effects of tariffs and their slow incorporation into consumer pricing are essential to watch, especially as we move into seasonally significant spending periods.

For more detailed economic analyses, check out CNN’s finance section.

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