Tariff impact on inflation slowly building

Up to now there has been only limited passthrough from tariffs into final consumer prices, but we still expect the impact to gradually mount in the second half of this year. Many retailers appear to have been willing to absorb the initial hit via lower margins, although we suspect that was mostly a temporary development as those firms waited for more clarity on where tariff rates would settle. Now that the Trump administration is concluding deals that would see the tariff rate facing most trading partners settling at between 15% and 20%, with even higher rates levied on Chinese imports, we suspect retailers will be forced to finally raise the prices paid by consumers.