After a Lag, Consumers Begin to Feel the Pinch of Tariffs
Many businesses chose to absorb the additional tax during the early days of President Trump's trade war. But evidence is emerging that they are running out of options to keep prices stable in the face of deteriorating profit margins, suggesting that the tariffs could have a more pronounced effect on prices in the months ahead.
Government data, including from the Commerce Department this week, show that prices rose in June on items heavily exposed to tariffs, such as home furnishings, toys and appliances.
And in recent days — before Mr. Trump announced tariffs for much of the world on Thursday night — Adidas, Procter & Gamble, Stanley Black & Decker and other large corporations told investors that they either had increased prices or planned to do so soon to offset the tariff costs. Companies like Walmart and the toymakers Hasbro and Mattel had already warned that tariffs would lead to higher prices.
'We have no interest in running a lower-margin business, particularly due to tariffs,' Richard Westenberger, the chief financial officer of Carter's, a children's apparel maker, said on a call with analysts on July 25. 'And if this is something that's going to be a permanent increase to our cost structure, we have to find a way to cover it.'
Economists have been watching for signs of tariff-related price increases since Mr. Trump rolled out his trade policy in the spring. But inflation remained relatively muted, defying expectations and prompting the White House to declare that those who predicted the tariffs would elevate prices were mistaken.
Even some forecasters are acknowledging that the tariffs have taken longer to work their way through to consumer prices than initially anticipated. Jerome H. Powell, chair of the Federal Reserve, said during his news conference on Wednesday after the Fed's July meeting that the process might be 'slower than expected at the beginning.'
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