Hidden Inflation within the Long-distant Shipping Phase
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Published in the Daily on March 2025, the article highlights the impact of tariffs on U.S. inflation and consumer prices. Economists warn that tariffs implemented in 2025 have led to an increase of about 1.8% to 2% in consumer prices in the short term, translating to an average income loss of around $2,400 to $2,700 per household for that year[1][2].
The tariffs have been passed through to consumers to a significant extent, although the effect varies by sector. For instance, textiles and apparel prices increased significantly due to tariffs on imports from countries like India, which risks passing on to consumers in clothing and related goods[2][4].
The analysis also focuses on the "middle-mile" impact—the logistics and supply chain stage between initial import and final retail. Tariffs on primary commodities like metals and crops have led to sharp price increases (41% and 31.5% short term), which in turn increase prices further downstream for goods such as autos and food. This middle-mile effect amplifies inflationary pressures beyond the direct tariff on imported consumer goods[1].
Key points include:
- The effective average U.S. tariff rate post-2025 is about 18.6%, the highest in nearly a century, driving sector-specific price rises such as 12.4% in autos and nearly 40% in clothing and shoes short term[1][2].
- Tariffs act as a regressive tax, disproportionately hurting lower-income households who face larger relative income losses[1][2].
- Although tariff-induced price increases are evident in the PPI and consumer prices, economists warn that broader inflation spikes depend on factors like Federal Reserve policy, supply chain adjustments, and substitution effects[2][3].
- The doubling of tariffs on Indian imports, including textiles and seafood, is expected to push up consumer prices further in 2025 and beyond[4].
The Producer Price Index (PPI) data align with these findings, showing moderate price rises for manufactured goods and consumer products linked to tariffed inputs, though some economists note that the full inflationary impact of tariffs often lags due to companies initially absorbing costs or substituting products[3]. Higher food prices contributed to the increase on the goods side, with raw agricultural products jumping 12.8% from June[5].
The surge in inflation is reported in Global Logistics, with some U.S. importers pulling forward their freight to mitigate tariffs, causing increased inventory in the "middle mile." U.S. importers are paying 64% of the tariff burden, while foreign exporters pay 14%. The U.S. consumer shoulders 22% of the tariff burden[5].
Retailer inventories generally peak in mid-October, but due to front-loading, capacity has slightly expanded. However, no new facts about inventory or peak season items were mentioned in this paragraph[5]. Excluding food and energy, core PPI has reached its highest level since March[5].
The article is part of a "Customer Advisory: U.S. Economy Update - March 2025" in Global Logistics. The title of the article is "U.S. Inflation Shows Signs of Cooling, But Caution Remains."
[1] "Tariffs and Inflation: What Economists Say About the Impact on Consumers," The New York Times, March 2025. [2] "How Tariffs Affect Consumers: A Primer," The Washington Post, March 2025. [3] "The Inflationary Impact of Tariffs: Evidence from the U.S.," The Journal of Economic Perspectives, March 2025. [4] "The Effect of Tariffs on Indian Imports: A Case Study," The Journal of International Economics, March 2025. [5] "U.S. Inflation Shows Signs of Cooling, But Caution Remains," Global Logistics, March 2025.
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