US stocks surged to fresh all-time highs on Tuesday, defying expectations despite a mixed inflation report. The National Bureau of Economic Research found that fears of large immediate price increases from President Donald Trump’s tariffs may be unwarranted.
Analysts say the rate of inflation for some goods exposed to tariffs picked up in July, but it was weaker for others. Tariffs are costs added to imports in the form of taxes, with Goldman Sachs estimating consumers have borne 22% of the cost increases so far.
The market’s positive reaction is a stark contrast to its dramatic spring sell-off in April, when Trump introduced shock new tariff levels. Investors now believe the Federal Reserve will err on the side of supporting the economy by lowering interest rates.
However, not all experts are optimistic. Small businesses remain vulnerable to the impact of tariffs, with many struggling to stay profitable. The National Federation of Independent Businesses reported a shrinking share of respondents say they are profitable.
The US economy still has challenges ahead, and a separate measure of inflation tracking wholesale prices is set to be released on Thursday. If it shows more pronounced signs of inflation, stocks could quickly come down from their new highs.
Source: https://www.nbcnews.com/business/markets/how-trump-tariffs-impact-stock-market-investors-rcna224521