Appliance taxes

Weekly Updates

US May consumer and producer prices seemed relatively benign. Headline numbers reflected things like weaker tourist demand, suppressing some prices. However, the stock being sold today is generally pre-tariff inventory. That limits what headline data can tell us about the effects of US President Trump’s trade taxes.
In the details, consumer appliance prices signal how taxes might change prices for US shoppers. The US imports a large proportion of the appliances it buys, and all those grills, stoves, and washing machines have been subject to trade taxes since April. There was no meaningful inventory build up of appliances in anticipation of the trade taxes. An inventory surge might have delayed the impact of taxes.
US consumer prices for appliances tend to fall—appliance prices have fallen almost 24% this century. This deflation is now disappearing. Major appliance prices surged 4.3% in May—the second largest monthly increase ever (the largest was a post-lockdown August 2020 spike).
A 10% tariff should (approximately) raise final consumer prices about 4%. Appliance importers seem to be making their customers pay. Appliances are not frequent purchases, reducing consumers’ price sensitivity. But if this pattern repeats in other sectors as pre-tariff inventory is exhausted, consumer awareness of the costs of tariffs is likely to increase.