Recent data from the Labor Department has shown that the price of foreign exports to the U.S. — before tariffs — has held steady over the last few months. That means U.S. importers are absorbing most of the tariff burden.

There was a lot of news on the inflation front this week. The Consumer Price Index and the Producer Price Index both showed that inflation is accelerating in categories that are exposed to the Trump Administration’s tariffs including furniture and appliances.

There will also be another update on inflation — the Import Price Index. That index can show a lot about who bears the cost of tariffs.

“And so, it happens before there any taxes and fees applied to it through customs,” said Meagan Schoenberger, senior economist with KPMG.

Schoenberger said that can show how tariff costs are shared. That’s because a foreign company that exports to the U.S. might decide to lower its prices if it’s worried that tariffs will make its products too expensive.

“The foreign exporter doesn’t want to lose their whole market, so maybe they start discounting,” said Schoenberger.

But that hasn’t really been happening recently. Import prices actually rose a little in April and May. The price of certain imports from China, for instance, have fallen some.

“But when you look, especially if we focus on items from China, the overall increase in tariffs has been far, far, far larger,” said Jason Miller, a professor at Michigan State University.

Which means foreign exporters aren’t absorbing much of the tariffs at all. American importers are. That’s why the Import Price Index can be an early indicator.

“Because if we’re not seeing substantial declines in that, then we know ‘OK, if there’s a 10% tariff on these goods coming from Europe, that’s telling me U.S. importers are paying more,’” said Miller.

Which means businesses and consumers will too.

Source: Marketplace

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