Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The Trump administration's recent tariff increases are expected to significantly impact consumer prices, similar to the effects observed during the 2018-2019 trade war [2][5] - Preliminary data indicates that the effective tariff rate has increased by approximately 7.2 percentage points (pp) as of May, with expectations of a total increase to about 14pp with additional sectoral tariffs [14][29] - The analysis suggests that foreign exporters have absorbed about 20% of the tariff costs, while the remaining costs are split between US businesses and consumers [29][34] Summary by Sections Tariff Implementation and Effects - Tariff hikes began in early February, with significant increases taking effect in April, leading to delayed impacts on consumer prices due to shipping and payment delays [2][8][10] - The effective tariff rate is estimated to have risen by 9pp, with customs revenue indicating a lower increase of 7.2pp due to various delays [14][18] Cost Absorption and Price Changes - Price data through May shows that a 1pp increase in product-level tariff rates has led to a 0.2% decline in import prices, primarily driven by China [21][27] - The share of tariff costs passed onto consumers increased from 0% in the first month to 10% after two months, and to 40% after three months [3][46] Core PCE Inflation Forecast - Tariffs have raised core PCE prices by approximately 6 basis points (bp) this year, suggesting that without tariffs, the current core PCE inflation rate of 2.7% would be 2.6% [52] - The report maintains an unchanged inflation forecast, expecting tariff effects to boost core PCE inflation by about 1pp this year, leading to a year-over-year rate of around 3.3% in December [53][58]