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(What’s Left of) Our Economy: Tariff-Led U.S. Inflation Remains Mythical

09 Friday Nov 2018

Posted by Alan Tonelson in (What's Left of) Our Economy

≈ 1 Comment

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aluminum, appliances, beer, cans, Emily Rauhala, inflation, Labor Department, laundry equipment, metals, metals-using industries, Producer Price Index, steel, tariffs, Trade, Trump, Washington Post, wholesale prices, {What's Left of) Our Economy

Talk about bad timing! Yesterday, the Washington Post ran a piece by Emily Rauhala, who covers Canada and other foreign news for the paper, on how soaring tariff-juiced aluminum prices are already “bruising” the American beer industry. According to her report, “In a vivid example of how Trump’s trade tactics abroad can hurt business at home, the U.S. beer industry, which needs aluminum to make cans, is seeing costs rise.”

But this morning, the U.S. Labor Department came out with data showing that, although prices for aluminum (along with steel, another tariff-ed metal) have jumped from last October to this past October, they’re now actually starting to fall. And special bonus! The same trend seems to be holding for household laundry equipment.  Product-specific tariffs boosted prices for a time, and generated big headlines, but now the price are falling back to earth.

The new Producer Price Index (which measures price changes at the wholesale level) reports that “aluminum mill shapes” last month cost buyers 8.2 percent more than they did in October, 2017. But since July, they’ve dropped on a monthly basis by 2.1 percent, 0.3 percent, and 0.4 percent.

Further, it’s important to remember that, as with steel and the laundry machines, last year’s prices were artificially depressed by foreign dumping. In other words, these prices were set by foreign governments determined to grab market share for their producers at the expense of their American-based rivals. They had nothing whatever to do with market forces.

The statistics for “steel mill products”? Between October, 2017 and October, 2018, prices did indeed surge by 18.2 percent. But the monthly numbers since July reveal price changes of +2.6 percent, zero percent, and -0.8 percent.

Also significant: In lots of metals-using industries, there are no major year-on-year price increases at all. These include hardware, plumbing fixtures, turned products (like bolts and nuts and screws), metal valves, ball bearings, auto parts, aircraft parts, and aircraft engines and parts (which are tracked separately).

The price data for household appliances are found in a another of today’s Labor Department tables, and don’t separate out laundry equipment from other appliances where no special tariffs were applied. But they strongly indicate that any producers thinking they’d gain major pricing power from these levies were utterly delusional.

From October, 2017 through last month, prices in this category were up only 3.3 percent. And the last three months’ worth of sequential changes? Down 0.1 percent, up 1.3 percent, and down 0.7 percent. Think we’ll see this development  generate any headlines?

As with investing, past performance doesn’t always predict future results. But it’s not bupkis, either. At some point, President Trump’s tariffs may indeed supercharge U.S. inflation. To date, however, trade-related inflation reports at best deserve the warning, “Let the buyer beware.”

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Current Thoughts on Trade

Terence P. Stewart

Protecting U.S. Workers

Marc to Market

So Much Nonsense Out There, So Little Time....

Alastair Winter

Chief Economist at Daniel Stewart & Co - Trying to make sense of Global Markets, Macroeconomics & Politics

Smaulgld

Real Estate + Economics + Gold + Silver

Reclaim the American Dream

So Much Nonsense Out There, So Little Time....

Mickey Kaus

Kausfiles

David Stockman's Contra Corner

Washington Decoded

So Much Nonsense Out There, So Little Time....

Upon Closer inspection

Keep America At Work

Sober Look

So Much Nonsense Out There, So Little Time....

Credit Writedowns

Finance, Economics and Markets

GubbmintCheese

So Much Nonsense Out There, So Little Time....

VoxEU.org: Recent Articles

So Much Nonsense Out There, So Little Time....

Michael Pettis' CHINA FINANCIAL MARKETS

New Economic Populist

So Much Nonsense Out There, So Little Time....

George Magnus

So Much Nonsense Out There, So Little Time....

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