Why hasn't US inflation exploded under the impact of tariffs? The Four Truths Keep Economists Silent

Despite the Trump administration imposing a series of new tariffs on dozens of US trading partners this year, prices of goods and services across the US have gone against the expectations of many economists and remain relatively stable.

Economists warn that just because tariffs have not yet triggered a new round of inflation, there is no guarantee that prices will not soar later this year. They pointed out that recent data shows a slight increase in the cost of goods including clothing, household items, and appliances.

Tariffs are the money that importers must pay at the border for imported goods, and it takes a long time for them to penetrate into the economy. This is because companies often try to delay passing on cost increases to customers in order to avoid losing market share to competitors.

However, experts acknowledge that tariffs have not yet released severe inflationary pressures that could lead to price spikes. As for White House officials, they have always insisted that foreign exporters, not American consumers, will bear the brunt of the increased tariff costs.

White House spokesperson Desay said in a statement, "Despite pessimistic predictions about inflation and economic recession, it has been several months since Liberation Day and inflation is trending towards an annualized rate not seen since President Trump's first term, and a recent analysis by the Council of Economic Advisers has found that prices of imported goods are actually decreasing." He was referring to the benchmark tariffs and other tariffs initially announced by President Trump on April 2.

Economists believe that despite the highest tariffs imposed by the United States in decades, inflation has not risen significantly for the following four reasons.

1. The tariffs are not as high as many people expected

Data shows that despite President Trump's repeated threats to increase import tariffs, the actual average tariff rate imposed on US imports is not as high as announced.

According to data from investment consulting firm Kaitou Macro, the average tariff rate on US imports in June was 9%, far lower than the 15% predicted by many economists after Trump announced a series of tariff measures earlier this year.

Barclays economist Cuss said, "Rather than saying that the response to tariffs was low, it is more accurate to say that the increase in actual tariff rates was relatively limited until June

Both Barclays and Capital Economics have stated that the actual tariffs imposed by the United States are still lower than previously estimated, partly due to a decrease in exports of goods from countries facing higher tariffs to the United States. In contrast, countries with lower than average tariff rates export more goods to the United States.

The result is that the average tariff rate on imported goods is lower than many economists' predictions earlier this year.

In addition, many imported goods to the United States have been exempted from higher tariffs. According to Barclays' data, only 48% of the approximately $258 billion worth of imported goods that impacted the US retail market in June were subject to tariffs.

In a recent report, analysts at Barclays stated, "Although taxable goods are facing an increase in tariff rates, a large portion of imported goods from the United States are still tax-free, which is a major reason for the low actual tariff rates

2. Before the tariff increase, the company hoarded goods

American retailers increased their inventory earlier this year as they anticipated the Trump administration would raise tariffs on imported products and components. Experts say that many retailers are still selling these non-tariff products, which has delayed price increases.

For example, Cuss from Barclays said, "The import of goods from Canada has significantly increased, and these goods will later be subject to tariffs before the tariffs are implemented. Perhaps the import volume of these goods in May and June was relatively low, which is reflected in the small number of taxable goods

Experts warn that retailers will eventually exhaust these low-cost goods imported earlier this year, which could lead to future price increases.

3. Retailers are currently digesting costs

Many retailers are currently bearing additional tariff costs.

Analysts from investment consulting firm Kaitou Macro stated in a recent report that companies have been willing to absorb the initial impact by reducing profits, and we suspect this is mostly temporary as these companies are waiting for tariff rates to become clearer

They stated:AohuiBut in the long run, we question whether this is a sustainable outcome. With the uncertainty of tariff levels easing in the coming weeks, interest rates for retailers will become clearer in the next year or two, and we expect more companies to raise prices

4. Tariffs often gradually push up inflation

It usually takes several months for tariffs to penetrate into a company's supply chain and be reflected in the prices consumers pay in stores.

A report from the Dallas Federal Reserve in June pointed out that the full impact of tariffs will not be immediately apparent, but it will take a long time, peaking approximately one year after the tariffs take effect. This means that any tariffs imposed by the United States this year are unlikely to have a significant impact on inflation later this year and before 2026.

So far, the transmission effect of tariffs on final consumer prices has been limited, but we still expect its impact to gradually increase in the second half of this year, "said analysts from Kaitou Macro in a report

The last possibility is that the Trump administration's shift towards trade protectionism policies will trigger another round of severe inflation, and this concern has been exaggerated. The White House insists that this transformation will protect job opportunities and make the United States more competitive globally.

White House spokesperson Desay said in a statement, "The government has consistently maintained that the cost of tariffs will be borne by foreign exporters who rely on entering the US economy, which is the best and largest consumer market in the world