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“… Companies had raised prices last year after tariffs hoisted costs. Yet starting in the fall, many firms held off on increases and sometimes offered discounts to capture holiday shoppers.
The pricing break is over. Many companies typically raise prices at the start of the new year. Yet increases appeared to be stronger than normal for January for electronics, appliances and other durable goods, said UBS economist Alan Detmeister.
Some companies have pointed a finger at tariffs for their increases, while others, especially small businesses, also blame higher wages and hefty health-insurance costs that firms said they can’t absorb or share with suppliers.…”
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“… The Adobe Digital Price Index found that online prices posted their largest monthly increase in a dozen years in January, driven by higher prices for electronics, computers, appliances, furniture and bedding. …”
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lawtig02
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Revisiting this. We're now at Year 1.2 or so of the 4 years we have to endure. Trump's policies have been so disastrous that we have a very real chance of breaking this cycle. Will the next nine months before the midterms be sufficient to make Trump -- and only Trump, not the Republicans in Congress -- responsible for Americans' economic dissatisfaction? What happens if we head into 2028 with a Democratic Congress trying to fix things and Trump in the White House saying no to everything? Is this the breaking point, where people get so unhappy so quickly that they associate the economic malaise with the Republican president who caused it and not the Democratic president elected to clean up the mess?
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UK bank bosses plan to set up Visa and Mastercard alternative amid Trump fears
Exclusive: First meeting to be held over domestic payments system aimed at reducing reliance on US networks
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Here's my shocked face
superrific
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And yet they claim inflation dropped to 2.4%. Not a chance. There is no chance that inflation was 2.4%, unless seasonal adjustments are doing A LOT of work.
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White House National Economic Council Director Kevin Hassett says 1.6%
"We've got high growth, and we have core inflation running at 1.6% if you look at the last quarter, and I think that's about where we should be,"
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“… A new study by the New York Federal Reserve doesn’t directly weigh in on the hawk-versus-dove debate. But researchers at the bank use a proprietary price measure to try to pinpoint the underlying rate of inflation by stripping out any temporary factors, including the effects of the shutdown and limited data collection.
What did New York Fed researchers Martin Almuzara and Geert Mesters find? The rate of inflation in the U.S. stood frozen at 2.83% at the end of 2025 — still well above the Fed’s 2% target.
What’s more, the recent slowdown as suggested by gauges such as the CPI could be ”largely transitory,” they said….”
Pretty much wait and see mode.
1moretimeagain
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Duke Energy seeks a 15% price hike to celebrate The Golden Age.
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In the clip above, Hassett calls this Fed study an “embarrassment … the worst paper I’ve ever seen in the history of the Federal Reserve System. The people associated with this paper should presumably be disciplined because what they’ve done is put out a conclusion that’s created a lot of news that is highly partisan based on analysis that wouldn’t be accepted in a first semester Econ class. … They’re basically only looking at changes in prices, so they’re assuming that quantities don’t move at all but guess what quantities did move at all….”
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lawtig02
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So I'm not an economist, but I did take a first semester Econ class back in the day. If I'm remembering correctly, price, in most cases, is determined by where the supply and demand curves intersect. So if the Fed paper is looking at changes in prices, it's by definition taking into consideration the movement of "quantities," which would be measured by changes in the curves.
Am I missing something, or is my recollection of an Econ 101 class from 30 years ago more accurate than public statements made by the current NEC Director?
superrific
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they don't do empirical work in first semester economics.
superrific
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It's hard to know what Hassett is driving at since he's not bothering to explain himself, but I think he's pointing to a potential fallacy of composition. Let me tease out the point.
1. Suppose you sell gift baskets, and you fill your gift baskets with various numbers of two types of goods: caviar, and salt. I know, great gift basket, huh? Anyway, let's further suppose the price of caviar goes up by 20% and salt by 30%. What happens to the price of your gift basket?
There's no right answer here, as the problem is underspecified. Note that the price of the basket could go down. If you had 2 caviars ($100 each) and 1 salt ($1 each), and you went to 1 caviar and 2 salts, the price went from $201 to $120+1.3*2 = about 122.5.
I think that's what he means by you have to know the quantities.
2. So, when looking at tariffs, generally speaking you can't measure their effect on the economy without knowing quantities, for the same reason. If prices of imported goods go way up, but their volume goes way down, they might not be inflationary at all -- indeed, they could, in theory, bring prices down if they force people to substitute cheap domestic goods for expensive foreign ones. That's not how our trading patterns work, but in theory it's possible.
3. But the "paper" in question -- it's actually more like a blog post -- is not trying to measure the effect of the tariffs in any general sense. It merely wants to know, who is paying the tariffs. For that, they basically compare prices to tariff revenues. Here's their methodology:
Suppose foreign exporters charge $100 for a good, and the importing country decides to levy a 25 percent tariff on it. If the foreign price remains unchanged at $100, the duty paid is $25, increasing the import price to $125. In this case, the tariff incidence falls entirely on the importer; in other words, there is 100 percent pass-through from tariffs to import prices, and therefore on U.S. consumers and firms.
In contrast, the exporter might lower its price in order to avoid losing market share. If foreign exporters respond to the tariff by lowering their price to $80 (i.e., $100 divided by 1.25), the price paid by importers will remain $100 (with $20 in duties paid to the government). In this case, 100 percent of the tariff incidence falls on foreign exporters, who now receive $20 less for the same good; in other words, there is zero pass-through from the tariff since the import price is unchanged.
Considering an intermediate case, suppose the exporter lowers its price to $96 to absorb some of the cost in response to the 25 percent tariff. The 25 percent tariff is then calculated on the new, lower price, making the tariff-inclusive price the importer pays $120. In this scenario, the lower export price means the exporter pays $4 of the burden, while the higher tariff-inclusive price means the importer pays $20. We define the incidence on the importer as the ratio between the price increase due to the tariff ($120 minus $100) and the total tariff revenues; in this example, the incidence on the importer is 83 percent ($20 divided by $24); the incidence on the exporter (that is, the price decrease they suffer as a ratio of the total revenues from tariffs) is 17 percent ($4 divided by $24).
4. So what this "paper" cannot tell you is the effect of the tariffs on inflation. It isn't measuring past the import stage. We don't know if the importer eats the tariff or passes it along to the consumer. But it's not purporting to. It cannot tell you the effect of tariffs on the economy, because it isn't adjusting for quantities. If imports fall dramatically, then even an increase in their prices might not have much effect because they have become a smaller slice of the economy. But it's not purporting to that either.
The "paper" is simply asking: for every dollar of tariff revenue collected, how much did the price paid by the importer change. For this, you do not need quantities. The quantity adjustment occurs in the tariff revenue data itself. Here you only need to know that for every dollar of tariff revenue collected, import prices went up by about 94 cents. Hence, a 94% incidence rate on the importing nation (us).
It's not telling us whether the country is better or worse off from the tariffs. Maybe the overall trade volume has shrunk and hence American producers are making more money and there are more jobs and everyone is getting rich. It's not likely, but possible -- and that could be true whether Americans pay 20% or 94% of the tariff revenue. Again, the paper isn't purporting to answer that. It is just asking, who is paying the tariffs. And for that, quantities are not needed.