President Trump’s tariffs have had surprisingly little impact on inflation, with prices rising just 0.1% in May. While some imported goods saw increases—canned fruits and vegetables (1.9%), major appliances (4.3%), and coffee (1.2%)—overall inflation remains minimal. Three factors explain this:
– Companies stockpiled imports before tariffs took effect
– Price increases take time to work through the economy
– Weak consumer spending limits businesses’ ability to raise prices
Economists are split on what’s next. Some expect tariff impacts to emerge soon, while others believe weak consumer demand could actually lead to deflation—similar to the 1930s Smoot-Hawley tariffs. The Federal Reserve is watching closely, with potential rate cuts expected in September if inflation stays low.