Here are the three reasons why tariffs have yet to drive inflation higher

Despite widespread fears to the contrary, President Donald Trump 's tariffs have yet to show up in any of the traditional data points measuring inflation.
In fact, separate readings this week on consumer and producer prices were downright benign, as indexes from the Bureau of Labor Statistics showed that prices rose just 0.1% in May.
The inflation scare is over, then, right?
To the contrary, the months ahead are still expected to show price increases driven by Trump's desire to ensure the U.S. gets a fair shake with its global trading partners. So far, though, the duties have not driven prices up, save for a few areas that are particularly sensitive to higher import costs.
At least three factors have conspired so far to keep inflation in check:
Companies hoarding imported goods ahead of the April 2 tariff announcement.
The time it takes for the charges to make their way into the real economy.
The lack of pricing power companies face as consumers tighten belts.
'We believe the limited impact from tariffs in May is a reflection of pre-tariff stockpiling, as well as a lagged pass-through of tariffs into import prices,' Aichi Amemiya, senior economist at Nomura, said in a note. 'We maintain our view that the impact of tariffs will likely materialize in the coming months.'
This week's data showed isolated evidence of tariff pressures.
Canned fruits and vegetables, which are often imported, saw prices rise 1.9% for the month. Roasted coffee was up 1.2% and tobacco increased 0.8%. Durable goods, or long-lasting items such as major appliances (up 4.3%) and computers and related items (1.1%), also saw increases.
'This gain in appliance prices mirrors what happened during the 2018-20 round of import taxes, when the cost of imported washing machines surged,' Joseph Brusuelas, chief economist at RSM, said in his daily market note.
One of the biggest tests, though, on whether the price increases will prove durable, as many economists fear, or as temporary, the prism through which they're typically viewed, could largely depend on consumers, who drive nearly 70% of all economic activity.
The Federal Reserve's periodic report on economic activity issued earlier this month indicated a likelihood of price increases ahead, while noting that some companies were hesitant to pass through higher costs.
'We have been of the position for a long time that tariffs would not be inflationary and they were more likely to cause economic weakness and ultimately deflation,' said Luke Tilley, chief economist at Wilmington Trust. 'There's a lot of consumer weakness.'
Indeed, that's largely what happened during the damaging Smoot-Hawley tariffs in 1930, which many economists believe helped trigger the Great Depression.
Tilley said he sees signs that consumers already are cutting back on vacations and recreation, a possible indication that companies may not have as much pricing power as they did when inflation started to surge in 2021.
Fed officials, though, remain on the sidelines as they wait over the summer to see how tariffs do impact prices. Markets largely expect the Fed to wait until September to resume lowering interest rates, even though inflation is waning and the employment picture is showing signs of cracks.
'This time around, if inflation proves to be transitory, then the Federal Reserve may cut its policy rate later this year,' Brusuelas said. 'But if consumers push their own inflation expectations higher because of short-term dislocations in the price of food at home or other goods, then it's going to be some time before the Fed cuts rates.'

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Retaliation, regime change, sleeper cells and impeachment: The looming questions in the wake of Trump's attack on Iran

President Donald Trump bombed Iran's nuclear facilities just weeks after Israel began attacking the nation over concerns it was developing a nuclear weapon. What happens next? Should Americans expect retaliation from Iran? If so, where, and in what form? Secretary of State Marco Rubio said on Sunday that what happens next will largely be up to Iran and its response to the U.S.'s bombing. 'If the regime wants peace, we're ready for peace. If they want to do something else, they're incredibly vulnerable. They can't even protect their own airspace,' Rubio said on CBS's Face the Nation. How did the US attack Iran? On June 21, Trump initiated Operation Midnight Hammer, which saw B-2 bombers and missiles strike Iran's nuclear facilities where the U.S. and Israel believe Iran was enriching uranium for use in nuclear weapons. The Natanz and Isfahan nuclear sites were hit by a salvo of 30 Tomahawk Land Attack Missiles — cruise missiles with a range of at least 1,000 miles — fired from American submarines. At the Fordow nuclear site, which is located hundreds of feet underground, as many as six 30,000 munitions known as Massive Ordnance Penetrators — which are referred to by the Air Force designation GBU-57A/B — hit the site. The MOP so-called bunker-buster bombs were designed specifically to attack and destroy hardened facilities such as Fordow which are otherwise protected from typical munitions. The bombs used against Fordow were dropped from B-2 Spirit stealth bombers flying out of Whitman Air Force Base in Missouri. Will Iran retaliate? No one knows, perhaps not even Iranian leaders. Tehran could choose not to retaliate in an effort to reopen diplomatic options with the U.S., though its unclear if that would stop Israel from continuing to launch missiles into its territory. In 2020, after Trump assassinated Iranian general Qassim Suleimani, Iran launched a wave of missile attacks against U.S. troops in Iraq, but then pulled back from further retaliation, possibly in order to avoid a larger regional war. Iran could proceed in a similar fashion now. It's unclear if Ayatollah Khamenei will seek to re-establish diplomatic avenues with Trump. What can Iran do to the U.S.? Iran could seek to attack U.S. troops or U.S. assets in the region. The United States has about 40,000 troops stationed across the Middle East, in more than a dozen countries including in Saudi Arabia, Qatar, Kuwait and the UAE, and on ships in the region. It could also target U.S. commerce. Tehran could try to shut down the Strait of Hormuz, cutting off a vital shipping lane and blocking oil tankers from entering or leaving the Persian Gulf. Iran also has cyberwarfare capabilities or it could work with allied elements — like Al Qaeda — to carry out proxy attacks on U.S. and Israeli interests in the region. Is the U.S. at war? Officially, the U.S. would have to declare war, which requires Congressional approval. But that is mostly a formality. The U.S. did not declare war on Afghanistan or Iraq but still was involved in "boots on the ground" armed conflict in both countries. Asked directly during an interview with NBC's Kristen Welker whether the U.S. was now at war with Iran, Vice President JD Vance replied: 'No Kristen, we're not at war with Iran, we're at war with Iran's nuclear program.' Is the U.S. aiming for regime change? There have been mixed messages from the Trump administration about whether they are trying to bring down the Ayatollah's regime. The U.S. stated that regime change was an aim in its 2003 invasion of Iraq – something it achieved but at very great cost and leaving a long and controversial legacy. Vance told NBC's Kristen Welker on Sunday morning: 'Our view has been very clear that we don't want a regime change. We do not want to protract this or build this out any more than it's already been built out. We want to end their nuclear program and then we want to talk to the Iranians about a long-term settlement here.' However, several hours later, Trump appeared to contradict him with a post on his social media site: 'It's not politically correct to use the term, 'Regime Change,' but if the current Iranian Regime is unable to MAKE IRAN GREAT AGAIN, why wouldn't there be a Regime change??? MIGA!!!' What is the War Powers Resolution and can Trump be impeached over the attack? Trump's opponents have called his strike illegal, citing the War Powers Resolution of 1973, which requires the president to give Congress a 48-hour notification before taking any military action. It also limits the deployment of U.S. armed forces to 90 days without a formal declaration of war. Some Democrats have already accused Trump of violating the act. "The President's disastrous decision to bomb Iran without authorization is a grave violation of the Constitution and Congressional War Powers," Congresswoman Alexandria Ocasio-Cortez, posted on X. If Trump did violate the Constitution and the War Powers Resolution, he could theoretically be impeached, but due to Republicans' control of both the House and the Senate, an impeachment vote would be extremely unlikely to succeed. 'This is not about the merits of Iran's nuclear program. No president has the authority to bomb another country that does not pose an imminent threat to the US without the approval of Congress. This is an unambiguous impeachable offense,' Democratic Congressman Sean Casten wrote on X. What has Iran said about the strikes? Iranian Minister of Foreign Affairs Abbas Araghchi accused the US of breaching international law in a social media post following the strike. 'The United States, a permanent member of the United Nations Security Council, has committed a grave violation of the UN Charter, international law and the NPT [Nuclear Non-Proliferation Treaty] by attacking Iran's peaceful nuclear installations,' Araghchi said. He called on the rest of the UN to share in Iran's outrage over the attack, and said that Iran 'reserves all options to defend its sovereignty, interest, and people'. 'The events this morning [Sunday] are outrageous and will have everlasting consequences. Each and every member of the UN must be alarmed over this extremely dangerous, lawless and criminal behavior," he said. According to a New York Times report, Iran's Supreme Leader, Ayatollah Khamenei, has taken shelter in a bunker since the start of Israel's missile attacks, and has named three possible successors to lead the country in the event of his assassination. What's the deal with sleeper cells? Following Saturday's strikes, which Trump claimed 'totally obliterated' Iran's nuclear sites of Fordow, Natanz and Isfahan, both White House and FBI officials have been on high alert for Iranian sleeper cells. Sleeper cells consist of spies or terrorists hiding out in the U.S. or Western countries that remain inactive, often living quiet and unassuming lives working regular jobs until they are ordered to act on a mission. According to reports, Tehran may now try to activate these covert spies – should they exist – after the U.S. joined Israel's military operations against Iran. Sleeper cells have been broken up in the U.S. in the past, such as in 2010 when 10 Russian sleeper agents were arrested and exchanged in a prisoner swap with Moscow. Who are Iran's allies? Iran's allies include some of the same groups and nations that oppose the U.S.'s role on the world's stage. Iran backs both the Lebanese militant force Hezbollah and Palestinian militants Hamas, and both groups would be considered allies of Iran. The Popular Mobilization Force in Iraq, Yemen's Houthi rebels, and Bashar Al-Assad's loyalists before his ousting in Syria are all also supporters of Iran. The country has also been supporting Russia in its war against Ukraine, and enjoys a relationship with Moscow. Similarly, Iran maintains a strategic and economic partnership with China. What has the rest of the world said about the U.S. strikes? The world's response to Trump's attack in Iran has been mixed, though most statements express concerns over what happens next. Democrats The Democrats have condemned Trump's attack, accusing him of pushing the nation toward all-out war with Iran. House Minority Leader Congressman Hakeem Jeffries issued a scathing response to Trump's attacks. 'President Trump misled the country about his intentions, failed to seek congressional authorization for the use of military force and risks American entanglement in a potentially disastrous war in the Middle East,' Congressman Hakeem Jeffries said in a statement. 'Donald Trump shoulders complete and total responsibility for any adverse consequences that flow from his unilateral military action.' United Nations United Nations Secretary-General António Guterres said he was "gravely alarmed" by Trump's action. 'This is a dangerous escalation in a region already on the edge – and a direct threat to international peace and security', he said. 'At this perilous hour, it is critical to avoid a spiral of chaos. There is no military solution. The only path forward is diplomacy. The only hope is peace.' United Kingdom In the United Kingdom, Prime Minister Keir Starmer cautioned Iran to seek a diplomatic response and insisted maintaining stability in the region was a priority, according to a statement from Downing Street. 'Iran's nuclear programme is a grave threat to international security. Iran can never be allowed to develop a nuclear weapon and the US has taken action to alleviate that threat,' Starmer said in a statement. European Union The European Union walked the line, saying that it agreed that Iran must be stopped from developing a nuclear weapon, but also urging restraint from both Tehran and the U.S. and Israel. Israel Israel praised Trump's actions. 'Congratulations, President Trump. Your bold decision to target Iran's nuclear facilities with the awesome and righteous might of the United States will change history,' Prime Minister Benjamin Netanyahu said in a televised address. 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Times

21 minutes ago

• Times

Offer of talks went unanswered — so Trump sent bombers instead

T he clock started ticking down towards the US bombing of Iran after the Iranian regime failed to respond within a 60-day deadline set in a private letter from President Trump to Ayatollah Ali Khamenei. Even as military preparations were in full swing over the past week, senior officials said Trump remained open throughout to a meaningful overture from Tehran, as indicated when he told his press secretary to announce on Thursday that he would decide 'within two weeks' whether or not to join Israel's campaign. Marco Rubio, the secretary of state, went even further, saying on Sunday that the bombing mission could have been aborted while the planes were in the air if circumstances had changed.

Daily Mirror

36 minutes ago

• Daily Mirror

Donald Trump's defence chief claims Iran attack was shared with lawmakers

US Secretary of Defense Pete Hegseth was asked when congress was informed that President Trump had taken executive action to launch an offensive on Iran US Defence Secretary Pete Hegseth revealed to journalists that Congress was not informed about Saturday's strikes on Iranian nuclear facilities until after they had taken place. In a press briefing on Sunday morning, the former Fox News pundit turned Trump ally responded to reporters' queries about the surprising move. When one journalist asked the 45-year-old when Congress was notified that the president had taken executive action, he answered, "They were notified after the planes were safely out." ‌ After a brief pause, he added, "Uh, we complied with the notification requirements of the War Powers Act." Then, a moment later, he stated: "They were. ..immediately thereafter" ‌ Several politicians from both parties have criticised Trump's action, accusing the president of acting unconstitutionally. Congressman Thomas Massie, a Kentucky Republican and vocal opponent of U.S. involvement in the Israel-Iran conflict, reacted on X just minutes after Trump announced the offensive, stating, "This is not Constitutional." Massie has been a key figure behind a bipartisan war powers resolution aimed at preventing American military engagement in the ongoing Middle East tensions, reports the Mirror US. Others were more restrained in their criticism while still expressing concern about executive overreach, with Republican Warren Davidson, a congressman for Ohio tweeting: "While President Trump's decision may prove just, it's hard to conceive a rationale that's Constitutional." Marjorie Taylor Greene, a staunch Trump supporter, has openly criticised the President for siding with Israel in its conflict against Iran. ‌ On social media, she fumed: "Every time America is on the verge of greatness, we get involved in another foreign war." She also pointed out the cause and effect of the hostilities: "There would not be bombs falling on the people of Israel if Netanyahu had not dropped bombs on the people of Iran first." The political sphere was caught off guard by Trump's sudden move, especially since he had previously declared that he would take "two weeks" to decide on US involvement in Israel's conflict with Iran. ‌ Trump had earlier indicated a period of contemplation, saying, "Based on the fact that there's a substantial chance of negotiation that may or may not take place with Iran in the near future, I will make my decision whether or not to go in the next two weeks," as read by White House press secretary Karoline Leavitt last Thursday. In a surprising admission, Trump acknowledged his collaboration with Israel and Prime Minister Benjamin Netanyahu in orchestrating the strikes, expressing gratitude towards Netanyahu for his backing. Netanyahu reciprocated the sentiment on Fox News, stating, "Tonight, President Trump and the US acted with a lot of strength. President Trump, I thank you. The people of Israel thank you." According to the Iranian state-affiliated news agency, the Iranian Revolutionary Guard issued a stern response: "Today's act of aggression by the terrorist American regime has granted the Islamic Republic of Iran the legitimate right to act in self-defense, including through options that go beyond the delusional calculations of the aggressor coalition." The comments were somewhat enigmatic regarding the specific 'options', but the menace was unmistakable. With an air of defiance, they continued: "The Islamic Revolutionary Guard Corps is well-versed in the realities of this full-scale hybrid war and will never be intimidated by the noise of Trump or the criminal gangs ruling Washington and Tel Aviv."