Good luck to you if you’re looking for signs of tariffs-led inflation in yesterday’s U.S consumer price data from the Labor Department.
It’s not that goods that used tariff-ed products (either steel and aluminum, or inputs from China) or that are tariff-ed themselves (final products from China) haven’t become more expensive since the relevant levies were imposed. It’s that the prices of many goods completely unaffected by the tariffs have gone up as well – and in many cases, faster than those that have been affected by the trade curbs. So there’s no evidence that the tariffs themselves have had any notable impact.
In fact, these latest figures (bringing the story up through December) underscore how many forces and developments influence price changes.
A great example is provided by canned fruits and vegetables – presented below in the table showing price changes over various key periods of time (including for the post-March tariff period) for metals-using products. Their costs of course include the cost of either the aluminum or the type of steel used in their cans. When you look at the numbers for most of these time frames, it’s clear that the prices of these foods have risen faster than the overall rate of what’s called “core inflation” – the inflation rate minus the costs of food and energy, which are considered too volatile price-wise to yield an accurate understanding of what economists regard as the nation’s underlying, most fundamental, inflationary performance.
Interestingly, the prices for canned fruits and vegetables have increased much faster during these periods than the prices of food overall. So what’s driving the big price increases in these canned foods must be the cans, right – and presumably what they’re made of? Not if you look closely.
For the real problem is clearly vegetables. Both month-to-month and clearly for the entire year, fresh vegetable prices have soared. Largely as a result, the prices of canned vegetables have jumped unusually strongly, and significantly boosted the numbers for the overall canned fruits and vegetables category.
The special role being played by vegetable prices is also clear from looking at the trends in food prices – which aren’t included in the core inflation number. Except for December, these prices have risen considerably more slowly than those prices in the core grouping, or in the economy as a whole.
If you’re still skeptical, look at the price trends for several other food products that often come in cans – like beverages of all kinds, and soup. There’s simply no consistent pattern of their increasing faster than core inflation over any time period.
Similarly, although the prices of metals-using auto parts have risen more robustly than core inflation, the prices of metals-using vehicles have risen much more weakly. In fact, from December, 2017 to December, 2018, they’ve fallen in absolute terms. So something, or somethings, other than metals prices and tariffs count for much more in the total prices of these goods.
Nov.-Dec. Since April y/y April y/y Dec.
core inflation: 0.21 percent +1.39 percent +2.12 percent +2.22 percent
overall inflation: -0.06 percent +1.09 percent +2.43 percent +1.95 percent
food: +0.37 percent +0.98 percent +1.39 percent +1.58 percent
fresh fruits & vegs: +1.94 percent +1.82 percent -0.45 percent +1.75 percent
fresh fruits: +1.33 percent -1.73 percent +1.35 percent -0.73 percent
fresh vegetables: +2.63 percent +6.05 percent -2.53 percent +4.63 percent
processed fruits +0.67 percent -0.64 percent -0.59 percent +0.87 percent
canned fruits +1.48 percent +0.99 percent -0.07 percent +3.12 percent
canned fruits: +1.44 percent +1.39 percent -1.50 percent +2.29 percent
canned vegs: +1.30 percent +1.12 percent +1.04 percent +4.18 percent
soups: +2.49 percent +2.28 percent -0.54 percent -1.43 percent
malt beverages -0.04 percent +1.82 percent +0.84 percent +1.87 percent
consumed at home
alcoholic bevs -0.04 percent +1.34 percent +2.17 percent +2.25 percent
juices & non- + 0.13 percent +1.77 percent -0.25 percent +2.51 percent
carbonated drinks: +0.41 percent +3.01 percent +0.03 percent +4.07 percent
non-frozen, non- +0.18 percent +1.37 percent -0.53 percent +1.46 percent
new cars & trucks: 0 percent +0.78 percent -1.62 percent -0.24 percent
auto parts: +0.42 percent +1.58 percent -0.74 percent +2.20 percent
Tariffs on goods from China have been in effect for fewer months than the metals tariffs. And since July, they’ve been imposed in phases, which were followed by a decision by President Trump to delay increases in a big tranche as part of the latest cease-fire in the trade conflict with China. So the data is less definitive. But thus far, at least, the prices of the goods below – which represent some of the main imports from China subjected to tariffs by the first rounds of these levies, which were imposed in July – have mainly rising more slowly than the rest of core inflation sectors. (The sportswear numbers are dicey, since such apparel is not broken out from the rest of the category as such. So the figures below represent results from a women’s apparel category that includes sportswear.)
Nov.-Dec. Since Aug. Aug. y/y Dec. y/y
core inflation: +0.21 percent +0.73 percent +2.19 percent +2.22 percent
furniture: +0.55 percent +0.90 percent -0.66 percent +1.68 percent
auto parts: +0.42 percent +0.82 percent +0.39 percent +2.20 percent
tires: +0.98 percent +1.50 percent -1.64 percent +1.29 percent
appliances: -0.33 percent +1.25 percent +2.31 percent +4.74 percent
sportswear: -0.89 percent -2.14 percent -0.86 percent -1.33 percent
As for appliances, their out-performance is due largely to a separate set of tariffs imposed on large household laundry equipment starting in February. As shown below, however, even in this case, price increases are starting to moderate. That’s clear from the decline in the year-on-year figure between February and December, and from very slow price increase recorded between November and December.
Nov.-Dec. Since Feb. Feb. y/y Dec. y/y
core inflation: +0.21 percent +1.67 percent +1.86 percent +2.22 percent
appliances: -0.33 percent +3.41 percent +0.25 percent +4.74 percent
major appliances: +0.19 percent +11.59 percent -4.22 percent +9.02 percent
I know that I may be starting to sound like a broken record on the (negligible) impact of tariffs on the American economy so far. But until globalization cheerleaders in politics and business, and their mouthpieces in the Mainstream Media, start telling the story accurately, I’ll keep correcting the record.