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Yahoo
3 hours ago
- Yahoo
Shock tax hike advice to Treasurer
Accidentally published advice from Treasury has revealed Jim Chalmers has been advised to increase taxes in order to return the budget to surplus, with the government also warned it will not meet its 1.2 million homes target as part of the National Housing Accords. First reported by the ABC, the details were mistakenly revealed in an unredacted Freedom of Information request submitted by the broadcaster and shared in an incoming government brief issued by Treasury after Labor won the May 3 election. Although Treasury requested the documents be deleted and unpublished after noting the error, the ABC said the details were 'in the public interest'. While no specific taxes were identified, the Treasurer was told he would need to identify 'additional revenue and spending reductions' in order to put the budget in a 'sustainable' position, the ABC reported. The papers said 'tax should be raised as part of broader tax reform,' and suggested 'indirect taxes' and superannuation taxes as a potential avenues. This comes as Labor intends to double the taxes on superannuation accounts above $3m, from 15 to 30 per cent, with Mr Chalmers stating the move would only affect 0.5 per cent of people. However the Opposition has opposed the tax as the $3m threshold will not be indexed, with the tax also affecting unrealised gains, penalising people who hold property and other assets in their super portfolio. In the unredacted papers, Housing Minister Clare O'Neil was also advised to 'adjust' Labor's 1.2 million homes target, which it currently must meet by June 30, 2029. Ms O'Neil was urged to look at how migration and skills training could boost the construction workforce, and reassess how to best use state and territory grants as 'leverage' for improved home building rates. Speaking on ABC RN on Monday, Environment Minister Murray Watt said it was 'not unusual' for a minister to receive advice from government departments. He also said Labor remained committed to the Housing Accord targets. 'I, of course, haven't seen them (the Treasury advice documents) myself, but you will have seen that we've taken a lot of steps already to ensure that we can meet that housing goal,' he said. 'We recognise that it's ambitious, but it's certainly our intention to meet it.'
Yahoo
6 hours ago
- Yahoo
A $100 billion mystery is unfolding on tariffs and inflation and economists are cracking the case
Economists have for months warned that tariffs would cause an inflation surge, but as of July, there's little evidence of that in economic data, despite about $100 billion in tariffs already collected by the Treasury. Fortune asked economists to explain why. The possible reasons range from 'it's too soon' to 'consumers won't stand for it.' Since the first weeks of President Donald Trump's second term, when the president signaled a wholesale reimagining of the international trade system on a scale not seen in decades, mainstream economists have warned that prices would surge. The mantra, repeated by everyone from mainstream economists to factions of the GOP, has been clear: A tariff is a tax on consumers. Businesses said the same, with three -quarters of importers in a recent New York Fed study declaring they planned to pass on some tariff costs to customers. But halfway into the year and well into the most consequential reshuffling of trade in half a century, tariff-fueled inflation is missing in action. The tariffs are certainly in place: The Treasury so far has collected a record-setting $100 billion in customs duties, and is on track to pull in $300 billion this year. The tariffs are paid by U.S. importers—think Walmart and other retailers—when goods cross the border into the U.S. It takes some time to work their way into the system, but eventually higher prices get passed onto consumers. Those higher prices directly influence the overall price levels in inflation measures. Except there's a mystery, wrapped in an enigma, and coated in a puzzle. One place tariffs aren't showing up? In the inflation numbers. For four months, official inflation readings from the Bureau of Labor Statistics have come in under expectations, with the latest inflation reading a relatively modest 2.4%. The president's Council of Economic Advisers (CEA) this week released a brief arguing that import prices have actually been falling. Why doesn't the data show a tariff hit? Here's what leading economists told Fortune. Though tariffs have been discussed for months, they haven't actually been in place for that long. 'Regarding the impact of tariffs on prices, the timeframe used by the CEA is way too short to draw any definitive conclusions,' said the fiscally conservative National Taxpayers Union said in a critique on the study, which looked at prices through May. 'Trump's 10% nonreciprocal tariffs were only imposed in April.' Tariffs on steel and aluminum went into effect in March and increased in June, while Chinese imports have been subject to a 30% tax since March; dozens more 'reciprocal' tariffs, initially announced in early April, have now been postponed. Meanwhile, official government price data takes time to collect and release. As of mid-July, the most recent data for the Consumer Price Index and Personal Consumption Expenditures deflator, covers May. Immediately after tariffs were announced, importers rushed to bring in goods before they were subject to a higher rate. Businesses brought in so many goods, with no corresponding sales, that it briefly flipped the U.S.' GDP into negative territory. (In economist math, imports count as a negative to GDP.) That surge means that businesses could still be largely selling goods brought in under pre-tariff prices. 'Businesses stockpiled inventory, and presumably haven't had to raise prices on goods because they're sitting on the shelf. Eventually they will, and once they start to raise prices it'll start impacting consumers,' said Eric Winograd, chief U.S. economist at AllianceBernstein, to explain this theory. Uncertainty, in a word, is 'the most important reason' the hard data doesn't yet show tariff impact, according to Eugenio Aleman, chief economist at Raymond James. 'Business owners price their goods at replacement cost. If they have to buy the same good in the future, they have to increase the price [charged to the customer] if the price of the replacement is higher,' he told Fortune. The problem, though, is uncertainty. 'Everybody knows the prices that firms will pay for replacement goods will be higher, but nobody knows by how much. That uncertainty is keeping many firms from repricing their goods.' Businesses, particularly small businesses, could be choosing to eat the cost of tariffs for the time being. Unlike large businesses, they have a smaller client base and could be reluctant to hike prices, Aleman said. 'Maybe small firms are eating some large portion of the tariffs. Why? Because they can't afford to lose clients,' he said. One potential data point indicating this possibility is recent Commerce Department figures showing growth in proprietors' income—a proxy for small businesses—flatlining in May. Aleman stressed that more than one month of data would be needed to determine if this is the case. Recent Bank of America research shows the amount of tariffs paid by small businesses in May nearly doubled from 2022 levels. 'Small businesses may be, in some ways, more susceptible to tariff pressures than larger businesses, given their access to capital is more limited,' the note read. An added factor is the bully pulpit of Truth Social, which Trump has wielded freely at even the largest retailer thinking of hiking costs. 'If the president sees significant pass-through of tariffs via prices, you'll see a lot more public policy, probably via Twitter,' Jeff Klingelhofer, a managing director at Aristotle Pacific, told Fortune. Klingelhofer previously suggested that companies would take the brunt of the tariff impact because they're the only ones who could afford to, with consumers being 'tapped out' after years of high inflation. Former Federal Reserve economist Claudia Sahm also noted that companies today are less quick to hike prices now than they were during pandemic inflation, when Americans were flush with cash and eager to spend it. In 2021 and 2022, 'consumers up and down the income distribution, had some cash, and there were a lot of corporate earnings calls saying 'We're passing these [costs] through,' and the consumer could kind of handle it,' she told Fortune. Three years later, Americans have spent all the excess savings accumulated during Covid, and businesses 'realize if they increase prices dramatically, they could be losing customers,' she said. 'There is more hesitation. There is some raising of prices, but not the exuberance' of the pandemic. That's the position of Mark DiPlacido, policy advisor at American Compass, a conservative economic outfit that supports tariffs as a way to rebalance the U.S. economy. 'Foreign exporters have ended up absorbing a lot of [the costs], and businesses—very little has gotten to consumers at this point,' he said. Japanese carmakers, he noted, are slashing prices—sometimes nearly 20%—to compensate for the added costs U.S. buyers will pay. In other words, 'Japan itself and Japanese companies are eating the costs of the tariffs.' Every economist Fortune spoke with made some version of this point—that a tariff, rather than giving a blank check for a seller to boost prices, sets off a complicated negotiation between importers, exporters, and American end buyers. Finding the balance of which party pays how much will take time, and will be individual for each good and sector of the economy. 'Tariffs are a tax on imported goods,' Sahm said. 'Nobody wants to pay the tax, so who is the weakest link? Walmart can go in and tell their Chinese producers, 'You have to cut the price.' Maybe in the pandemic the consumers said, 'OK, I'll pay it—I'm not really happy about it, but I have the money.' The final answer, she added, 'can be very specific to the business, the industry, and also the general macroeconomic conditions.' This story was originally featured on Sign in to access your portfolio
CNBC
7 hours ago
- CNBC
Dow futures drop 200 points on Sunday after Trump slaps 30% tariff on Mexico and the EU: Live updates
Traders work on the floor of the New York Stock Exchange (NYSE) on July 11, 2025 in New York City. Spencer Platt | Getty Images U.S. equity futures slid on Sunday evening as Wall Street contends with continued tariff risks and second-quarter earnings on deck. S&P 500 futures lost 0.5%, while Nasdaq 100 futures dropped 0.6%. Futures for the Dow Jones Industrial Average fell 204 points, or 0.5%. On Saturday, President Donald Trump said the U.S. will impose 30% tariffs on the European Union and Mexico starting Aug. 1. Leaders of the EU and Mexico indicated that they intend to keep talking with the Trump administration this month in an attempt to agree on a lower rate. The announcement comes ahead of inflation readings this week, which will give investors a better sense of how the Trump tariffs already in effect are being felt throughout the economy. "Inflation is here with tariffs. It's just a question of who eats it. Those companies that have pricing power means that consumers are going to eat it. Those companies that don't have pricing power means that companies are going to eat it via a cut in their profit margin," Peter Boockvar, chief investment officer at Bleakley Financial Group, said Friday on CNBC's "Fast Money." Sunday's move in futures comes after a negative week for stocks, although the major averages are still near record highs. The S&P 500 dipped 0.31%, its first negative week in three. The Dow fell 1.02%, breaking a three-week win streak. Meanwhile, the Nasdaq Composite inched down 0.08%, snapping a three-week winning streak. Earnings season is set to ramp up later in the week. Major banks, including JPMorgan Chase, will deliver quarterly reports starting Tuesday. Another potential factor for investors to monitor is the rift between the Trump administration and the Federal Reserve. On Sunday, National Economic Council Director Kevin Hassett told ABC News that President Trump can fire Fed Chair Jerome Powell "if there's cause." Trump officials are probing the costs of renovation of the Federal Reserve's main building in Washington, D.C., while the president has repeatedly criticized Powell for not lowering interest rates. The central bank has pushed back against some of the criticisms of the renovation project. Equity futures were lower when trading resumed on Sunday evening in New York. Dow futures were down 200 points, or about 0.5%. — Jesse Pound U.S. President Donald Trump speaks to reporters as he departs for travel to Texas to tour areas affected by deadly flash flooding, from the South Lawn of the White House in Washington, D.C., U.S., July 11, 2025. Jonathan Ernst | Reuters President Donald Trump on Saturday said that Mexico and the European Union will face a 30% tariff rating starting Aug. 1. This continues the trend of Trump releasing letters announcing tariff rates unilaterally, and hits two of the United States' biggest trading partners. Leaders of both Mexico and the EU indicated that they plan to continue talking to the Trump administration ahead of Aug. 1 and are looking for a lower rate. European Commission President Ursula von der Leyen said Sunday the EU would delay its own tariffs, which were set to take effect on Monday, the Associated Press reported. — Jesse Pound, Erin Doherty
