Trump's Tariffs Push China's Factory Activity to Worst Contraction since Late 2023
Taarek Refaat
China's factory activity recorded its worst contraction since December 2023, revealing the damage the trade war with the United States has inflicted on the world's second-largest economy.
The National Bureau of Statistics said Wednesday that the official Purchasing Managers' Index (PMI) for the manufacturing sector fell to 49.0 in March, down from 50.5 in March. This was below the median forecast of 49.7, according to economists. A reading below 50.0 indicates a contraction.
The non-manufacturing PMI, which measures activity in the construction and services sectors, fell to 50.4 from 50.8 last month. This was below expectations of 50.6.
China's CSI 300 index of mainland-listed shares saw little change.
The PMI readings provide the latest official view of the state of the Chinese economy after the Trump administration imposed a 145% tariff on Chinese goods, a figure expected to hurt a sector that contributed to about a third of the economy's growth last year. Zhao Qinghe, a senior statistician at the National Bureau of Statistics, noted that the decline was due to a high base the previous month and "rapid changes in the external environment."
In a statement accompanying the release of the figures, Zhao reiterated the government's position that trade wars are zero-sum, pointing to a slowdown in industrial activity in major economies including the United States, the United Kingdom, and Japan.
In an early sign of trouble for Chinese exporters, cargo shipments collapsed, according to one estimate, by as much as 60%.
Economists at banks including UBS Group and Goldman Sachs have cut their forecasts for China's 2025 growth to around 4% or less in recent weeks.
The Caixin Manufacturing Purchasing Managers' Index for April came in at 50.4, higher than the forecast of 49.7. These figures indicate growth compared to the previous month, albeit at a slower pace. This particular indicator often reflects the activity of smaller, more export-oriented companies.
"The US tariff increases have weighed on external demand, with new export orders falling at the fastest pace since July 2023, leading to only a marginal increase in total new orders in April," said Wang Zhe, chief economist at Caixin Insight Group.
To help ease the pressure on exporters, Beijing this week announced plans to help struggling companies access loans and boost domestic consumption, but it stopped short of announcing bolder economic stimulus. Instead, officials are focusing on implementing the stimulus package passed in early March.
Beijing also appears in no hurry to negotiate with Washington. Foreign Minister Wang Yi warned countries against succumbing to US tariff threats, saying that appeasement would only encourage the "bully."
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Al-Ahram Weekly
10 hours ago
- Al-Ahram Weekly
Power struggles in US politics - Culture - Al-Ahram Weekly
Recent disputes at the top of US politics have drawn attention to a system that depends on the money of billionaires to win elections. What happens when political leaders and business tycoons get into open conflicts can be of much interest to the media and even entertaining for many curious onlookers. But such feuds when they happen in the US may very well shake the economy not only of the world's only superpower, but also those of some of its allies in the Middle East as well. The ongoing protests in Los Angeles in California over actions by US federal immigration enforcement officers seem to have temporarily bridged the gap between the two most influential men in the United States — US President Donald Trump and Tesla CEO Elon Musk. After weeks of disputes between the president and his most influential billionaire ally, the protests now seem to have caused Musk to soften his tone, express regrets for his calls for the impeachment of Trump, and even to praise the administration in the face of the riots. Last weekend, Musk's followers woke up to find that most of his previous posts about the president including allegations that Trump's name appears in documents related to convicted US sex offender and financier Jeffrey Epstein have been deleted. The tech billionaire, who was long seen as a supporter of Trump's policies regarding closed borders, curbing illegal immigration, and carrying out more deportations in the US, went further to admit that he regretted some of his posts against the president. 'I regret some of my posts about President@realDonaldTrump last week. They went too far,' Musk wrote on X. Trump reacted indifferently, saying that he was too busy to respond. He told the US network CNN that he was 'not even thinking about Elon' and would not be speaking to Musk 'for a while'. He said that he 'was disappointed in Elon', adding that he was 'really surprised' the billionaire had criticised his tax cut bill, also known as the One Big Beautiful Bill, one of the main legislative initiatives of the administration. Many described this softening of tone in the Trump-Musk dispute as a 'fragile peace' that does not mean that the two allies are back to normal, however. Trump has made it clear that he will not resolve his feud with Musk over tax cuts any time soon. But what really matters here is the significance of such feuds and how they could impact the US and world economy. The public breakup between the two powerful leaders has a deeper significance. It is a blunt show of what happens when big money is poured into politics and how the US is facing a tangle of challenges as a result of Trump's largely unpredictable policies in all domains, economic, political, and humanitarian. The public dispute between Trump and Musk did not break out all of a sudden. Not so long ago, Musk was Trump's close ally and co-head of his administration's Department of Government Efficiency (DOGE), where the tech billionaire spearheaded the mass layoff of federal workers. But recent weeks witnessed murky waters between the president and his businessman ally. The first sparks broke when Trump was apparently annoyed by Musk's criticism of DOGE's ability to reduce bureaucracy. The tension increased after the White House withdrew the name of Jared Isaacman, Musk's nominee for the head of the US space agency NASA, on the suggestion of Sergio Gor, director of the White House Presidential Personnel Office, who has been at constant odds with Musk. The tension reached a breaking point when Musk slammed Trump's massive tax cut and domestic policy bill, labelling it a 'disgusting abomination' for what he said would be its negative impact on US government finances. Among Musk's posts on X was one saying that Trump would have lost last year's presidential election without him. The dispute intensified after Trump warned Musk not to support Democratic Party appeals against the Republicans over the budget law. ECONOMIC REPERCUSSIONS: The question of whether the Musk-Trump breakup will negatively affect investors' confidence in the US, particularly in the field of technology and the stock market, remains open. The conflict has already affected companies owned by Musk, as their shares fell amid losses estimated at $150 billion. Tesla stock was downgraded in the aftermath of the Musk-Trump dispute. Analysts at Baird, a US financial research firm, warned that Tesla stock's plunge was largely related to Musk's involvement in politics, which has become a concern for investors and the markets. Trump has continued to say that Musk-related government contracts are also at stake. He previously told the US network NBC News that Musk would face 'serious consequences' if he contributed to Democratic candidates. Ahmed Shawky, an assistant professor of finance at the Islamic University of Minnesota in the US, confirmed that the Trump-Musk dispute may lead to the termination of Musk's contracts with the US Department of Defense, which are worth about $22 billion. Trump had told reporters that a review of Musk's extensive contracts with the federal government was in order. 'We'll take a look at everything,' the president said. 'It's a lot of money.' Shawky said that the dispute should not be seen in a personal context, however. 'It is a dispute between the head of the most influential state in the world and one of the richest businessmen in the world, which has resulted in big investment losses,' he elaborated. 'This may raise concerns among investors who may avoid taking US government investments, particularly in the light of the decline of the US dollar.' According to Shawky, Trump's controversial economic policies have already affected investors' appetite to invest in the US, particularly in the technology and transportation sectors. Economist Assem Mansour concurred, adding that the current turmoil in US markets in the aftermath of Trump's policies and the Trump-Musk dispute may well redraw the map of capital flows from the Middle East and investors' readiness to take risks. 'If the US political crisis turns into a major economic crisis, a decline in global energy demand will probably occur, especially if these developments are accompanied by a slowdown in China,' Mansour told Al-Ahram Weekly. 'Global energy demand indicators remain relatively strong for now, driven by the recovery in emerging economies,' Mansour said. 'However, a recession remains one of the possible scenarios over the coming months.' There is also the question of how Gulf investors will balance their economic interests with Musk while maintaining their close alliance with Trump. The Gulf countries have been keen on diversifying their investments in artificial intelligence, technology, and renewable energy rather than depending on oil as their only source of revenue. Companies such as Musk's Tesla and Starlink thus represent promising investment opportunities for the Gulf. In the meantime, the Gulf countries are keen to maintain a balance in their partnerships, and it remains questionable whether they will invest with Musk while maintaining good relations with Trump. 'The Gulf states are unlikely to enter into a unilateral alliance with any party,' Mansour maintained. 'The strategic interest of the region depends largely on a diversified partnership, benefiting from American technology and Western innovation, on the one hand, and from Chinese expertise and infrastructure, on the other. This balance is what characterises Gulf economic policy at the moment.' Internal feuds, however, are always an opportunity for opponents to kick in, and the Trump-Musk dispute, which seems part of a larger picture of an unstable economic and political landscape in the States, may well pave the way for US rivals, mainly China, to gain new markets in the Middle East. Mansour would not rule out this scenario. 'China will certainly seek to exploit any vacuum left by US tensions in the region,' he noted. 'China works to provide integrated solutions in the fields of technology and smart cities, and it will try to enhance the position of its currency on the exchanges. The Middle East has become an arena of strategic competition between the major powers, and China is moving in this context with a long-term vision.' However, Hani Al-Jamal, an expert in international relations, believes that 'the size of the Gulf's technological partnerships with the United States, signed during Trump's visit earlier this year, shows that the Gulf is currently heading towards the US and not China.' He added 'that there are many investment and political ties between the United States and the Gulf.' The Gulf will not refuse investments in China, especially after the military superiority shown by Chinese weapons in the recent India-Pakistan conflict. 'The Gulf will probably work on two parallel lines to take advantage of the tremendous technological advances of both the United States and China,' Al-Jamal concluded. ISRAELI INTERESTS: The Musk-Trump dispute may also pose a challenge to Israel as a close ally of Trump and with huge interests in the telecommunications and artificial intelligence sectors. According to Al-Jamal, Israel has been a focus area for Musk, especially since he owns Starlink, which has been providing Israel with espionage technology for years. 'In the light of the uncertainty in the relations between [Israeli Prime Minister Benjamin] Netanyahu and Trump, Netanyahu is likely to continue his cooperation with Musk,' Al-Jamal said. 'Musk's Starlink provides Israel with a comparative advantage. It gives it full coverage of top-notch Internet networks and social media that work against all the odds and in spite of any global circumstances. This makes it difficult for Israel to stop its cooperation with Musk.' Some analysts speculate that the Trump-Musk breakup will further deepen Musk's relationship with Israel, particularly in the light of Musk's talk about the launch of a new political party through which he might even present himself as a future president of the United States. Musk's financial resources and development projects in several sectors may push Netanyahu to bet on him. After all, X has provided a great platform for Israel to justify its war on Gaza and silence critics. One question that erupted in the wake of the Trump-Musk dispute was how it would affect the International Space Station (ISS). Musk threatened to retaliate by halting his company SpaceX's Dragon flights to the ISS. How those delays could affect the operation of the ISS and the safety of astronauts is a major concern among specialists, who have started to discuss possible alternatives. Alaa Al-Azzam, an assistant professor in the Department of Physics at the University of Jordan who specialises in atomic and molecular physics for space science applications, told the Weekly that 'suspending or delaying Dragon flights directly affects the operation of the International Space Station, as it hinders the rotation of astronauts, hinders the arrival of supplies and scientific experiments, and reduces the readiness of the vehicle as an emergency means for the crew.' According to Al-Azzam, current alternatives include the Russian Soyuz vehicle, which was the primary means of transporting astronauts to the ISS between 2000 and 2020. 'Soyuz served all human flights, including those by NASA astronauts,' she said. 'But when Dragon was introduced, it became the main means for the American crew. Soyuz is also used to transport Russian astronauts and some international partners, and it is considered a reliable alternative despite its limited seats and the need for political and technical coordination with Russia.' In the meantime, Boeing's Starliner, a new US crew transport vehicle that has entered its final stages of testing and began its first manned test flight in 2025, is expected to become an additional alternative to take astronauts to the ISS. Northrop Grumman's unmanned cargo vehicle Cygnus has been regularly used since 2013 to transport supplies and scientific experiments to the station, but it does not transport astronauts and is not used as an emergency vehicle, according to Al-Azzam. MONEY AND POLITICS: The question of the attitudes of the US public to Musk's pouring money into Trump's electoral campaign is also open. In an opinion piece titled 'Trump Musk feud shows what happens when unregulated money floods politics,' UK journalist Rachel Leingang from the British daily The Guardian made it clear that 'Musk isn't the first or last billionaire to pour big money into US elections.' 'Without me, Trump would have lost the elections, the Dems would control the House, and the Republicans would be 51-49 in the Senate. Such ingratitude,' Musk wrote on his X social platform. 'Billionaires in the US often seek to influence politics in big and small ways, throwing their money and influence around to extract what they want from the government,' Leingang wrote. 'But few are as explicit and influential as Musk has proven in the past year, and it's showing just how transactional and broken US governance has become.' Mehdi Afifi, a member of the Democratic Party, similarly noted that 'money has become a key element in politics in the US.' 'The two parties [the Republicans and Democrats] have contributed to legalising this through allowing huge funding pools to support candidates,' he told the Weekly. 'Despite the criticism that the Republicans are facing for supporting the wealthy and reducing taxes, the Democrats are also seeking to attract the same technology moguls who previously supported Trump. So, both parties bear responsibility for the current political landscape being stormed by the new financiers.' 'The Trump-Musk battle exemplifies the post-Citizens United picture of US politics: the world's richest person paid handsomely to elect his favoured candidate, then took a formal, if temporary, role with a new governmental initiative created for him that focused on dismantling parts of the government he didn't like,' Leingang wrote, referring to a US Supreme Court decision in 2010 that helped to introduce more money into politics. Analyst Adrian Calamil told the Weekly that 'presidential candidates in the US rely on the support of businessmen due to the huge costs of the elections, which raises doubts about conflicts of interest, as in the relationship between Trump and Musk, or the influence of [US financier George] Soros.' 'The most dangerous issue here may be the interference of foreign funds, such as Qatar's spending to influence the 2024 elections, which weakens confidence in democracy and worries everyone,' she said. For now, many Americans seem to have no other alternative than 'sitting ringside to a fight between the mega-rich president and the far-richer Republican donor to see who can cut more services from the poor,' as Leingang put it. 'As one satirical website also titled it, 'Aw! These Billionaires Are Fighting Over How Much Money to Steal from Poor People,'' Leingang concluded. * A version of this article appears in print in the 19 June, 2025 edition of Al-Ahram Weekly Follow us on: Facebook Instagram Whatsapp Short link:
Al-Ahram Weekly
10 hours ago
- Al-Ahram Weekly
Global economy undergoing largest-scale transformation: Putin - International
Russian President Vladimir Putin has claimed that the global economy is undergoing its most significant transformation in decades, as emerging powers reshape the balance of influence and redraw the economic map. At the plenary session of the St Petersburg International Economic Forum (SPIEF), Putin highlighted the growing influence of the so-called "global majority" — a term increasingly used in Russian and Chinese diplomatic rhetoric to describe countries outside the traditional Western bloc. 'At the beginning of the 21st century, BRICS countries accounted for one-fifth of the global economy. Today, they represent 40 percent, and this share is set to grow — inevitably,' Putin said. This year's SPIEF, held from 18 to 21 June under the theme Shared Values: The Foundation of Growth in a Multipolar World, is organized by the Kremlin-aligned Roscongress Foundation. Among the high-profile attendees at the plenary were Indonesian President Prabowo Subianto, Bahrain's National Security Adviser Sheikh Nasser bin Hamad Al Khalifa, Chinese Vice Premier Ding Xuexiang, and South African Deputy President Paul Mashatile. Putin argued that economic growth in the Global South is becoming 'increasingly sustainable' and demanded a new development model, free from what he described as neocolonial economic practices. 'We need a fundamentally different model, not one based on the rules of neocolonialism, where the so-called 'golden billion' is extracting resources from all other countries for the benefit of a narrow circle of elites,' he said. 'This isn't even in the interest of the people in those countries, but solely their elites.' Putin criticized the United States, claiming its economic gains had disproportionately benefited wealthy elites and not average citizens over the past decade. He linked this disparity to broader global political shifts. 'The middle class, regular citizens, haven't seen the benefits of this growth. That's one of the reasons we're witnessing political changes globally,' he said. He called for economic development to translate into improvements in quality of life, education, science, infrastructure, and technology. Russia, he said, is pursuing such an agenda. Putin said stable, long-term capital flows from international companies and investors are needed to drive growth. BRICS aims to provide a platform based on 'consensus, parity, and mutual respect.' He noted that at a BRICS summit in Kazan last year, 35 countries took part — representing two-thirds of the world's population and half of the global economy. 'They all expressed a shared vision for the future world,' Putin said. 'Today, BRICS is leading the way in launching large-scale projects to improve quality of life.' He cited initiatives in nuclear energy, aviation, artificial intelligence, robotics, IT, and new materials as examples of BRICS' innovation focus. Trade among BRICS countries, he said, has already exceeded $1 trillion and continues to grow. 'We welcome all partners willing to contribute to shaping a new global model of growth,' Putin added. 'The broader the circle of participants, the more effective and equitable this model will become.' He also highlighted the recent launch of Open Dialogue — a new international forum in Moscow with participants from over 100 countries. 'We intend to make this a regular format and build a whole ecosystem around it to develop breakthrough ideas.' Turning to the Russian economy, Putin said the country has now become 'Europe's number one' in gross domestic product and ranks fourth globally. He noted that annual inflation stood at 9.6 percent as of 16 June — still high but better than anticipated. 'This has already allowed for a cautious easing of monetary policy,' he said, adding that GDP had grown 1.5 percent in the first four months of 2025, with April's growth accelerating to 1.9 percent. He called on the Russian government to digitize the monitoring of economic indicators and keep structural reforms under 'special control.' 'I have focused today on five main areas of structural change in the Russian economy. Government programmes must be continuously adjusted to reflect the global situation and emerging opportunities,' he said. Follow us on: Facebook Instagram Whatsapp Short link:
Egypt Independent
11 hours ago
- Egypt Independent
So, has anything actually gotten more expensive because of Trump's tariffs?
CNN — Predictions from mainstream economists were dire after President Donald Trump launched his tariff campaign just a couple weeks after he began his second term in office: Prices would rise — sharply — they said, reigniting an inflation crisis that tens of millions of Americans had elected him to solve. But that massive, tariff-induced inflation spike hasn't materialized. Not even close. Not yet, anyway. Consumer prices rose just 2.4 percent, annually, last month, according to the Bureau of Labor Statistics. That was less than economists had expected, and only slightly higher than the 2.3 percent rate in April, which was the US economy's lowest inflation since February 2021. According to the Personal Consumption Expenditures price index most closely followed by the Federal Reserve, core inflation — which strips out volatile items like food and gas prices — fell to 2.5 percent in April. That was the lowest reading since March 2021. That's a far cry from what economists and consumers have predicted. Month after month, inflation has fallen short of Wall Street's expectations, as American businesses said they would be forced to hike prices as a result of historically high tariffs. America's effective tariff rate is now 14.1 percent, according to Fitch Ratings, up from 2.3 percent last year. That means Trump raised taxes on imported goods by nearly 12 percentage points in 2025. Economists expected substantial inflation increases as a result. Goldman Sachs analysts last month said core goods inflation could hit 6.3 percent this year and consumer prices would surge 3.7 percent by early 2026. JPMorgan economists said core inflation would nearly double by the end of this year. And American consumers in May expected prices to rise an alarming 6.6 percent this year, according to sentiment surveys from the University of Michigan. That prediction fell in June, but consumers still expect inflation to hit 5.1 percent in 2025. So what happened? Are economists just really bad at their jobs? Not quite. Their predictions may yet come true — and economists are largely cleaving to their bets. America's economy is enormous and complex, and predicting when prices will rise and fall can be an extremely tricky business — particularly when factoring in the on-again, off-again nature of Trump's tariff regime. Still, tariffs through mid-June haven't caused inflation to spike. Love tariffs or hate them, there's no denying inflation is lower now than when Trump took office. Very little has gotten more expensive Fed Chair Jerome Powell on Wednesday said just a few items are growing in price as a result of tariffs, including electronics that come from China. He said PCs and A/V equipment have become more expensive because of Trump's trade war. But the price increases aren't widespread yet, Powell noted, because stores are still working through the inventory that came in to their warehouses before Trump put tariffs in place. 'Goods being sold at retailers today may have been imported several months ago, before tariffs were imposed,' Powell said. Gantry cranes stand near shipping containers at Yangshan Port outside of Shanghai, China, on June 17. Go Nakamura/Reuters Research firm Telsey Advisory Group, which has been tracking the prices of 80 select consumer items across a wide variety of retail categories, reported this week that just 19 products it has tracked have gained in price since mid-April — and 16 items' prices fell. Similarly, the New York Times' Wirecutter, which recommends consumer products, tracked the prices for 40 of its top picks over the course of two months and found this week that the vast majority didn't change price at all: 10 gained in price and only half of those gained more than 7 percent. 'There haven't been many significant upticks in prices as of yet given that many retailers are still selling through their lower-cost inventory,' Dana Telsey, CEO and chief research officer of Telsey Advisory Group told CNN. Even autos, many of which are subject to a 25 percent tariff, plus a tariff of up to 25 percent on some imported auto parts, haven't gained in price — they've fallen. New car prices fell 0.2 percent in May, according to car-buying research site Edmunds, and they rose only 2.5 percent compared to the pre-tariff period in March. Both new and used car prices fell in May, according to the BLS' Consumer Price Index. That's because dealers are still working through their supply of pre-tariff cars, according to Ivan Drury, director of insights at Edmunds. Trump team takes a victory lap With prices remaining in check so far, the Trump administration has declared victory. 'They've all been discredited,' said the White House's top trade adviser, Peter Navarro, in an interview last month with CNN, referring to tariffs' detractors. 'What we got in the first term [of Trump's presidency] was not recession or inflation, we got price stability, robust economic growth and rising wages, just as we thought we would.' Navarro has frequently pointed to the low overall inflation during Trump's first term, despite his tariffs. And he's right: CPI peaked at 2.9 percent in mid-2018 before falling below 2 percent throughout most of 2019. But Navarro's assertion about the impact of tariffs on the US economy comes with a couple of significant caveats: First, Trump during his current term has already placed tariffs of at least 10 percent on $2.3 trillion of imported goods, comprising 71 percent of all US goods imports, according to the nonpartisan Tax Foundation. In his first term, Trump placed tariffs on just $380 billion worth of foreign goods. And second, the pandemic severely disrupted the global economy soon after Trump's tariffs took effect, preventing economists from getting a decent picture of how significantly prices rose. But some data shows prices gained in the specific sectors Trump targeted with his first-term tariffs. For example, after imposing some steel tariffs in 2018, US production expanded modestly, but it sent costs rising for cars, tools and machines; and shrank those industries' output by more than $3 billion in 2021, the International Trade Commission found in a 2023 analysis. Nevertheless, Joseph Lavorgna, a former Wall Street economist turned Treasury Department official, took a victory lap because inflation hasn't risen since Trump imposed tariffs during his second term. 'Tariffs have just not shown up at all in any of the data,' Lavorgna, counselor to the Treasury secretary, told CNN this week. 'The forecasting community has been completely wrong.' Lavorgna, a former SMBC Nikko Securities chief economist who also served in the White House during Trump's first term, said a broad range of inflation metrics suggests foreign producers are absorbing tariffs and that the trade war won't be inflationary. White House press secretary Karoline Leavitt echoed that message Thursday during a briefing, saying: 'America is quickly returning to the successful formula of the first Trump administration: low inflation and rising wages.' Economists say: Just wait Many mainstream economists argue that the low inflation of the spring represents a calm before the summer storm, when they expect prices to rise. 'It's a question of when, not if,' Stephanie Roth, chief economist at Wolfe Research, told CNN. Walmart, Target, Lululemon, Home Depot and Costco among others have said in recent weeks that they will raise some prices because of tariff pressures. Although some of the big box retailers said they would work to keep most prices low, they acknowledged that they operate low-margin businesses, and in the cases when American-made alternatives are unavailable or more expensive, they expect that they'll have to pass some of that additional cost to their customers. An employee counts inventory in a Walmart Supercenter on May 15 in Austin, won't be alone in their struggles with tariffs in the coming months, said said Sid Malladi, CEO of Nuvo, a company that manages businesses' trade partnerships. Price hikes will weigh on businesses, too, many of whom will take on some of the hit to keep prices as low as possible for as long as possible. But that could mean difficult conversations in the boardroom later this year about potential layoffs and other cost cutting. 'This is early innings. No one wants to be first out of the gate,' said Malladi. 'You don't want to risk reputational damage to your brand, because raising prices in this environment might cause customers to turn away from you. Many may eat their margin for a few months.' 'It's hard to overstate the level of anxiety businesses have,' Malladi added. Small businesses, without the supply chain mastery of larger companies, have struggled in particular to afford higher tariff costs and have said they are reducing supply or raising prices. Many have complained that American alternatives for some foreign imports may be unavailable or are too expensive. 'While larger retailers may have the scale, capital and pricing power to absorb or strategically offset these pressures, small and mid-sized players remain significantly more vulnerable, with limited flexibility to manage rising input costs or supply disruptions,' Telsey said in TAG's latest Product Pricing Analysis report. Telsey noted that prices, when they eventually start to rise, won't all gain equally or across the board. Only select goods will start to gain in price to start, likely beginning in late August or September. 'Inventory is ordered typically anywhere from six months to one year in advance, and it is expected that the select pricing pieces will begin to show up in late summer,' she said. Fed Chair Powell on Wednesday agreed that the tipping point for broad consumer price increases could come this summer as inventories of pre-tariff warehoused goods dry up. 'We do expect to see more of that over the course of the summer,' Powell said. 'It takes some time for tariffs to work their way through the chain of distribution to the end consumer.' Normally, retailers hold about 1 to 2 months' worth of inventory on items, noted Kristy Akullian, head of iShares Investment Strategy, Americas, so prices could begin to rise in the coming weeks. Another indication that prices could start to spike: In April's Institute for Supply Management services report, prices paid by businesses increased the most since November 2022, and business inventories contracted. 'Low inventories make it harder for companies to keep prices steady, so going forward, we expect the inflation impacts from tariffs to become more apparent,' Akullian said. Powell agreed with that timeline, noting companies that report on their business sentiment to the Fed have said they expect to pass those tariff costs on down the supply chain. 'Many, many companies do expect to put all or — some of the effect of tariffs through to the next person in the chain, and ultimately, to the consumer,' Powell said. 'So we're beginning to see some effects. We expect to see more.' Despite initial success at maintaining low prices, Treasury's Lavorgna conceded inflation could begin to rise down the road because of tariffs. 'I'm not saying there can't be a tariff effect on the numbers at some point,' he said.
