Trump steps up attacks on Powell with tariff inflation muted
Trump's latest round of tariff threats may have little effect on overall costs, however. Samuel Tombs of Pantheon Economics said the sky-high 'reciprocal' levies that could hit Japanese and South Korean imports on Aug. 1 won't have a material impact on the overall tariff rate or inflation, given that the exports from both countries are largely covered by exemptions and sector-specific levies.
What's more, there's some indication that certain exporters from overseas might be absorbing some of the costs by reducing prices for American importers. Economists at Goldman Sachs estimate that exporters have eaten a fifth of the costs so far — with Chinese exporters accounting for the lion's share — based on how product-level import prices have moved following the implementation of new import taxes. (Miran noted in his report that prices on imported goods began fading in 2023.)
Still, the remaining costs are considerable. The U.S. has taken in almost $100 billion in tariff revenue this year — Bessent recently said the total could climb to as high as $300 billion by year-end — but evidence suggests those costs have largely been borne by companies. In the same report, the Goldman team estimated that tariffs have been responsible for less than a one-tenth of a percentage point increase in consumer prices this year — though the effects could still intensify.
While businesses from Best Buy to Costco have raised prices due to import duties, many others are holding fire.
'Most businesses have not fully passed along the cost of the tariffs,' Neil Bradley, the chief policy officer and head of strategic advocacy at the U.S. Chamber of Commerce, said during a panel on Wednesday. 'Part of that's a hope that the tariffs go down. Part of it is a concern about market share that they might have. Part of it might be uncertainty about the macroeconomy.'
As long as that remains the case, high-level economic data will continue to provide Trump with arguments to go after Powell over borrowing costs — or make lowering interest rates a litmus test for anyone who might want to take his place.
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