Tell me where I'm wrong

[superrific]

I have to be wrong about this, right?

Let's say Trump announces 20% tariffs tomorrow. The tariffs cause an overall increase in the consumer price level of 7%, spread over two months. The initial response to the tariffs -- like first week or so -- might be tepid so that customers aren't jolted. But by mid-April, the prices should be rising and thus it will be a 3% price increase in April and a 4% increase in May.

The way inflation reporting works is the headline BLS number is an annualized rate based on the sequential increase. So if prices rise by 0.2% in a month, that's reported as 2.4% inflation. 0.2%*12

So, let's see. A 3% increase in April times twelve months = a reported headline inflation number of 36%. THIRTY SIX PERCENT. That's assuming 20% tariffs, of course, but it's still unimaginable. Good thing it would be a one-time effect because -- oh shit, the May number will be 48%. FORTY EIGHT PERCENT.

I feel like I'm making a mistake somewhere. A new brand of extract -- you know how it goes.

 

[evrheel]

I have to be wrong about this, right?

Let's say Trump announces 20% tariffs tomorrow. The tariffs cause an overall increase in the consumer price level of 7%, spread over two months. The initial response to the tariffs -- like first week or so -- might be tepid so that customers aren't jolted. But by mid-April, the prices should be rising and thus it will be a 3% price increase in April and a 4% increase in May.

The way inflation reporting works is the headline BLS number is an annualized rate based on the sequential increase. So if prices rise by 0.2% in a month, that's reported as 2.4% inflation. 0.2%*12

So, let's see. A 3% increase in April times twelve months = a reported headline inflation number of 36%. THIRTY SIX PERCENT. That's assuming 20% tariffs, of course, but it's still unimaginable. Good thing it would be a one-time effect because -- oh shit, the May number will be 48%. FORTY EIGHT PERCENT.

I feel like I'm making a mistake somewhere. A new brand of extract -- you know how it goes.

But these are special tax cut tariffs, Trump invented just for America
So no inflation

 

[p5mmr9]

The Impact of Tariffs on Inflation

www.bostonfed.org

According to this article - 10% of PCE is directly or indirectly imported. That seems quite low. Regardless, they estimate that the original 25% Canada/Mexico + 10% China tariffs could add .5 - .8 year over year inflation.

Additional cost is generally not simply "passed on" to the consumer. It will be added in to the margin multiplicatively. So, while I don't think your math is completely accurate I do agree these will be catastrophic.

​

 

[nycfan]

The Impact of Tariffs on Inflation

www.bostonfed.org

“… For example, we estimate that an additional 25 percent tariff on goods from Canada and Mexico combined with an additional 10 percent tariff on goods from China could add as much as 0.8 percentage point to core (excluding food and energy) inflation.

By contrast, the policy that was proposed during the presidential campaign, an additional 60 percent tariff on imports from China and an additional 10 percent tariff on imports from the rest of the world, could have contributed as much as an additional 2.2 percentage points to core inflation. …”

They go on to generally explain their methodology.

 

[heelinhell]

Leaving aside the actual impact on inflation, the economic narrative is becoming more and more negative with consumer sentiment sinking , the stock/bond markets spooked, and the business community enacting preemptive moves to mitigate the fallout from the Trump tariffs.

At this point I'm thinking it will be very difficult for GQPers to run an " economic prosperity" campaign in 2026...

 

[superrific]

The Impact of Tariffs on Inflation

www.bostonfed.org

“… For example, we estimate that an additional 25 percent tariff on goods from Canada and Mexico combined with an additional 10 percent tariff on goods from China could add as much as 0.8 percentage point to core (excluding food and energy) inflation.

By contrast, the policy that was proposed during the presidential campaign, an additional 60 percent tariff on imports from China and an additional 10 percent tariff on imports from the rest of the world, could have contributed as much as an additional 2.2 percentage points to core inflation. …”

They go on to generally explain their methodology.

Interesting. It doesn't my point, though -- which is that tariff-induced inflation can hit in such a hurry that the annualizing process will produce numbers that are really fucking scary. Imagine a headline in early May -- APRIL INFLATION ROCKETS TO 48%.

That piece doesn't attempt to estimate the secondary effects of tariffs (by its own admission), which seems wise given that those secondary effects are difficult to model in a single market; economy-wide, I can't even imagine. I suspect the secondary effects will be larger than the primary effects, though of course it depends on the specifics of the tariffs. By secondary effects I mean the price increases that domestic producers will charge, freed from foreign competition.