By Matt Underwood US producer prices post biggest gain in five months, and it’s clear that businesses are passing on tariffs. The recent data, with the Producer Price Index (PPI) jumping significantly, tells a story about rising costs that are ultimately being borne by consumers like you and me.
We’re all feeling the pinch, aren’t we? Tariffs, which are essentially taxes on imported goods, are a major contributing factor. And while there might have been promises of tax relief, the reality seems to be different. Many people are reporting that their tax bills are the same, or even higher, when factoring in the impact of these tariffs.
What this boils down to is a significant increase in the cost of many everyday items. Those of us paying attention can see that costs are on the rise. Items you buy are becoming significantly more expensive.
It’s tempting to put all the blame on one thing or another, but the underlying issue is that prices are going up. If companies aren’t absorbing these costs, and they’re not, then those increased costs are being passed onto consumers.
Of course, some will try to spin the narrative, and downplay the impact. But the numbers don’t lie. Higher producer prices usually lead to higher consumer prices. The cost of goods and services is climbing. This isn’t a good look for anyone.
And the ramifications extend beyond just the initial price increase. If companies are facing higher costs, they may not lower prices even if the initial cause of the increase fades away. They use all types of things as excuses. Eggs up? Everything else goes up. Gas goes up? Everything. Gas goes down? Prices stay high.
For some, it’s a matter of “winning,” but we’re the ones paying the tariffs. They blamed the prices on the tariffs and then charged more than they needed to just to cover them. Ground beef at $13 a pound is now the norm, and it’s getting harder every day for businesses to afford to hide the damage tariffs cause.
Let’s be clear: tariffs are often regressive. They disproportionately affect lower-income individuals because a larger portion of their income goes toward purchasing essential goods.
While some might argue that businesses could absorb the costs, it’s not realistic. Companies have a fiduciary duty to their shareholders, and they’re not likely to take a hit to their bottom line.
The housing market also plays a role in this situation. It’s difficult to sell and buy another house if it’s going to cost a lot more to buy another. And increased property values lead to higher taxes.
Some people might not fully grasp the implications of tariffs. You have to understand that tariffs have real-world consequences and can impact the bottom line for everyone.
The same thing happened in the steel industry. Tariffs were imposed, and prices went up overnight. The steel distributors raised prices, the trucking companies followed suit, and prices never really came down. Owners get more money, and consumers pay through the nose.
This process involves a calculation of net revenue as a percentage of costs, which means that the tariff cost is now included in the baseline. It is very hard to stay profitable with all of the new costs. All of a sudden goulash becomes an expensive meal.
It’s a complex economic dynamic, but the core issue remains the same. Prices are rising, businesses are passing on costs, and consumers are bearing the brunt.