It's still a bit of a mystery to me TBH. Not that Americans are paying it, but where's the cash?
The headline suggests it was all passed into consumers. So why is inflation still so low? If you add 10-30% to prices (granted, of imports, not of houses, domestic food etc), you'd expect more.
If companies were eating it (which apparently they aren't) then their profitability should be down. But that doesn't seem to be the case either.
So..??? It's like that riddle with the three guys buying a pizza. Where did the money go?
Imports seeing large tariff changes aren't a particularly large part of the CPI basket, and domestic substitutes exist. Expected responses from US manufacturers putting their own prices up are lagged, and tempered by some of the consumer response being simply buying less stuff.
How can it be possible that consumers are paying 96% of tariffs that range from 25-100%. Yet inflation has only risen by 0.5 points? Consumption would have to be less than a fifth of what it was a year ago. And why haven’t there been such equally drastic price changes on shelves if whats functionally the entire cost is being passed to consumer?
Ask your question the other way round? How did Chinese companies absorb the cost of the 125% tariff, were they selling it at less than half price or giving it away for free?
Answer is they didn't: if the US buyer wanted it that badly they picked up the tab or otherwise they waited for the tariff to come down to 10% or went without. Also, very few goods in the US (probably none in the CPI representative basket of goods) are bought directly from Chinese vendors, they're bought from US retailers. Those US companies can eat the tariff cost if the exporter won't and they can't sell at a higher price. That obviously affects their margins, their sales and their hiring.
Yes exactly, if the exporter is not absorbing the cost, and the consumer is not absorbing the cost (for the most part), the importing company must be absorbing the bulk of the cost.
inflation is low because people are buying less; remember that inflation is calculated based on actual expenses (a "basket of goods" but that basket is adjusted based on how much people are actually spending); demand for the newest tv or plastic phone case is down; people are still buying the same amount of food and using the same amount of gas, neither of which are tariffed because of exceptions to the tariff rules
prices are up so people are buying less, it's just that simple; only a handful of companies have reported their Q4 christmas earnings but retailers' are already forecasted to be way below previous years'
The tariffs haven’t really started hitting consumers yet, believe it or not. Major retailers rushed to get their Christmas goods into the U.S. before the deadlines. In 2026 we’ll start to see more of the impacts.
Chinese exporters and the Beijing government absorb most US tariffs rather than passing them fully to American consumers.
Commerce Secretary, Howard Lutnick: “The model is clear: 10% tariffs or less are paid by the manufacturers, the distributors, the businesses,” he said. “The consumer doesn’t pay. The consumer doesn’t pay because the seller doesn’t want to raise prices, because if they could, they would, but they don’t want to sell less. So they eat it.”
I feel we should have an independent source by now if that was true. Thousands of Chinese suppliers all taking losses to keep market share seems unlikely. A government program would have been clearly shown too. I think it is more likely that goods are being labelled with different origins and being imported through preexisting treaties like NAFTA (I forgot the Trumpian name for his negotiated version), or that Economists are shameless modern tortoise shell baking shamans that we need to sacrifice to appease angry dead ancestors.
The headline suggests it was all passed into consumers. So why is inflation still so low? If you add 10-30% to prices (granted, of imports, not of houses, domestic food etc), you'd expect more.
If companies were eating it (which apparently they aren't) then their profitability should be down. But that doesn't seem to be the case either.
So..??? It's like that riddle with the three guys buying a pizza. Where did the money go?