Core Viewpoint - Economists and analysts warn that President Trump's comprehensive trade policy, which imposes high tariffs on most goods entering the U.S., will lead to significant price increases for consumers, despite recent economic data showing relatively mild overall inflation [1] Group 1: Price Increases and Inflation Data - Consumer Price Index (CPI) data from May indicates price increases in several tariff-sensitive categories, with appliance prices rising 0.8% in both April and May, marking the highest monthly increase in nearly four years [1] - Toy prices have increased for the second consecutive month, rising 1.3%, matching a four-year high [1] - Home goods, tools, and sports equipment prices are accelerating after previously declining in the pandemic years [1] - DataWeave's analysis shows that home and furniture prices have accelerated significantly since January, with increases of 1.1% in February, 2.1% in March, 2.8% in April, 3.7% in May, and 4.7% in June [1] Group 2: Retailer-Specific Price Changes - Clothing and footwear prices remained stable from February to May but saw a slight increase in June, rising 1.7% compared to January [2][3] - Some retailers, such as Walmart and Target, have experienced larger price increases for toys, with prices rising 7.4% and 6.1% respectively since January, compared to an average increase of 3.8% [3] Group 3: Future Price Expectations - DataWeave's CEO predicts broader price increases in the coming months as tariff effects propagate through the supply chain, with expectations of "shrinkflation" and an increase in private label products due to consumer resistance to price hikes [3] - Wells Fargo anticipates that the upcoming June CPI report may mark a turning point, with higher effective tariff rates impacting overall inflation, particularly in core goods categories [3] Group 4: Mechanisms Behind Mild Inflation - Tariffs have been implemented in phases, with the earliest tariffs taking effect in February and March, while most were announced or implemented after April [4] - Trade policies and tariffs are subject to change, with many announced tariffs being delayed, canceled, or unexpectedly adjusted [4] - The transportation of goods takes time, with shipping from other countries to the U.S. potentially taking weeks or more, and domestic supply chains also requiring time to process imported goods [5] - Companies had stockpiled inventory before tariffs took effect, and some costs have been absorbed by foreign exporters, with Goldman Sachs estimating that about 20% of the additional costs are borne by exporters [6] - Businesses are hesitant to pass on high prices due to weakened consumer spending power, leading to reduced pricing power for companies [6] - Consumer spending is more focused on services during summer, with expectations that product prices will become more significant in household budgets during the fall and winter [6] - Economic data often lags behind current events, with key inflation data for June set to be released soon [6][7] - Rising commodity prices have been reflected in inflation data but are largely masked by falling gasoline prices and slowing price increases in the service sector [7] - Goldman Sachs noted that the effects of tariffs have not yet strongly appeared in official consumer price data, which is not surprising [8]