The June Producer Price Index (PPI) delivered another blow to the inflation hawks who insist tariffs are driving up prices. | Economy
Tariffs Still Are Not Producing Inflation
The June Producer Price Index (PPI) delivered another blow to the inflation hawks who insist tariffs are driving up prices.
Final demand prices rose a modest 0.2 percent on the month, and core goods prices ticked up just 0.3 percent—driven by specific categories like communication equipment and manufacturing capital goods, not broad-based inflation. More importantly, the data offer no support for the idea that tariffs are triggering a cascade of price increases across the domestic economy.
Tariff critics often dismiss PPI data by pointing out that it excludes imports. That’s true in the narrowest sense—PPI tracks the prices received by U.S. producers for goods and services made in America. But what this argument misses is that many economists didn’t just warn about direct pass-through of tariff costs on imports. They predicted that tariffs would affect the prices of domestically produced goods as well.
The theory was simple: if imported components became more expensive, manufacturers would shift to domestic inputs, bidding up those prices. Domestic firms would gain pricing power as foreign competition weakened. Rising costs would ripple through supply chains. Wall Street analysts warned that reshoring supply chains would raise domestic production costs, leading to broad inflation. They claimed that businesses would “take advantage” of tariffs to push up prices of goods that weren’t tariffed at all.
