US inflation showed signs of slowing down last month, but new tariffs on China could trigger another wave of price hikes. The White House confirmed that China’s total tariff rate is 145%, higher than the previously reported 125%. This increase pushed the overall US average effective tariff rate to 27%, the highest level since 1903.
Economists warn that this run-up in tariffs will likely trickle through to consumers, leading to higher prices. Claudia Sahm, former Federal Reserve Board economist and current New Century Advisors chief economist, said, “If we have a big pullback in the supply of goods, it could show up in higher consumer prices.” T-shirts are seen as a potential example.
The Bureau of Labor Statistics data showed annual core prices rose at their slowest pace since March 2021 last month. However, monthly CPI prices fell for the first time since May 2020. Chief economist Joe Brusuelas described this as a “good print,” but noted that it may be the last clean inflation print before tariff-induced increases kick in.
The 90-day global pause on tariffs has kept inflation risks elevated, despite concerns about supply chain redirection and potential job losses. Stagflation, where growth stalls, inflation persists, and unemployment rises, is a major concern for Wall Street. The Fed is holding back on adjusting interest rates due to uncertainty.
Seema Shah, chief global strategist at Principal Asset Management, predicted that tariffs will trigger a surge in inflation. She also suggested that the Fed may have to make three to four interest rate cuts this year due to a severe labor market slowdown or systemic risks. Federal Reserve Chair Jerome Powell has indicated that it’s too soon to adjust monetary policy, and the central bank is well-positioned to wait.
As the global economy navigates shifting trade dynamics, uncertainty remains a major concern for Wall Street and investors alike.
Source: https://finance.yahoo.com/news/t-shirts-could-be-the-new-eggs-why-trumps-chaotic-tariff-whipsaw-is-still-a-huge-threat-to-inflation-100004371.html