Bloomberg: Inflation Is Coming Thanks to Trump’s Tariffs

Inflation Is Coming Thanks to Trump’s Tariffs
Levies on steel and aluminum have yet to filter through to prices. But they will.
Bloomberg, July 26, 2018

 

 

Did the global economy dodge an economic bullet yesterday?

I doubt it. The plan to make a plan in the future does not give me much confidence that the trade war will not escalate further. In particular, the tariffs on Steel and Aluminum are already impacting corporate earnings; so far, they represent the gravest error and potential threat to the economy and market this administration has mustered.

I occasionally flee the fluorescent office lights to speak with small business owners in the real world.  Some were sanguine about the economy, others were more concerned. But my go to guy for real world perspective is the co-owner of Thomas’ Ham & Eggery.[i] His simple yet insightful take is that anything which raises input costs for metals like Steel and Aluminum eventually gets passed along to the consumer in the form of higher prices. (See Thomas’s Ham & Eggery Guide to Inflation for our 2006 discussion).

Now for the really bad news: if push-through tariff driven costs accelerate, the most natural outcome will be for the Federal Reserve is accelerate its tightening cycle. For the most part, the Fed has been sanguine about inflation. They are still somewhat fearful that the economic recovery is fragile, and have been going very slowly.

This could lead to a cycle that is anything but pleasant for the overall economy . . .

 

See the complete column at Bloomberg

 

 

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[i] Its best to get there before 8ish am on weekends, or be prepared to wait on line, regardless of the state of the economy…

 

 

 

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