US inflation starts to run hot

Tariff is a tax, more accurately a consumption tax. When you increase tax substantially, it cools down the economic activities. Depending on the significance of the tax amount, we may see a recession or even worse, deflation. It’s crazy that a president can unilaterally tax citizens/companies. It’s against US laws. Only Congress has such powers.

Really doesn’t matter if the consumer pays it or the producer or the middle man. Government is getting its cut (tax). Meaning money will get out of the market. In one scenario it will increase unemployment, in another scenario it may cause deflation. And these are not my words. Read the opinions of hundreds of respected economists.

In my opinion, it is too early to make such an assessment. The CPI data was weaker than expected, but we are only at the beginning of the process. Moreover, it is necessary to look at the individual items that created the overall result, core inflation was higher. Tomorrow's PPI will be a closely watched indicator.

I understand what you mean, but it's an awfully static view. Automatically add a higher tax to the original price of the product. Do you think the market will behave with such a simple model? No. The impact of tariffs needs to be evaluated by how individual market entities have dealt with tariffs. And then deduce the impact from that. For example, if a foreign manufacturer reduces its price due to the introduced tariff so that the price of the product for the American consumer remains the same after adding the tariff, the American consumer will not be angry, inflation will not increase and Trump will get his tax. However, the substitutability of the given product will be most important factor. If you are the only manufacturer in the world, you do not have to reduce the price of the product due to the tariff and your basic assumption (your basic model) will apply. If the given product is substitutable, and moreover from countries with different tariffs, there will be a competitive battle between these producers. Who will be willing to make more concessions in price of their side of production. And last but not least, if the product is substitutable by a domestic US manufacturer, then the latter will be able to increase its original price to the effect of the tariffs on products imported from abroad. Measure all these model variables X all specific products on the market = total impact of the introduced tariffs on inflation (- / 0 / +). The result being the most likely to be an increase in inflation. In my opinion, it is impossible to completely absorb the tariffs without increasing final prices of products. The question is how much inflation will there be in the total sum of all products due to the tariffs.But let's also say that with a weak dollar, the inflation effect will be higher. The strength of the dollar could have helped reduce the impact of tariffs on imported products from abroad. Well, with a weak dollar, other central banks will have to cut rates or weaken their own currencies.

If we are talking about the global market, then yes, you are right. If we are talking only about the US market, then we need to wait to see what effect will prevail in the total sum. Very likely higher inflation, the question is how big the increase will be. How much will it limit the purchasing power of US consumers. But for domestic US producers, a new market opportunity. To replace imported products with their own production. What will be the effects of retaliatory tariffs. How will Trump spend the collected amount of tariffs. Whether as a result, the US will reduce taxes for consumers and thus increase their purchasing power, etc. There are many questions for the US market that cannot be predicted in advance as completely clear. But the global market will suffer and there I agree with you.

True but they do cause a price increase.

Tariffs do not create inflation.

Says the Orange Head. lol

The price of

2Y yield fell to 3.668% today. Fed is cutting in September and the only question is if it'll be by 25bps or 50bps. If things remain the same, it'll be 25bps.