Stealth Tariff Inflation and Stunning Tariff Inflation

This monstrosity has two heads. We have reports today of two kinds of inflation already hitting US consumers due to the Trump tariffs—both extremely hot. One is a kind that will never show up in inflation reports because it does not appear on prices at store shelves or in advertised online prices. Let’s call it …

Stealth inflation

This head of the beast is already rising from tariffs that get tacked on to the price of goods purchased upon delivery to the consumer by the shipping company, such as UPS, when US citizens buy directly from foreign sources. Here’s proof that, yes, Americans certainly do pay for US tariffs, and if you are a citizen buying directly from any nation, other than the US, you have zero leverage to negotiate the supplier into compensating for the tariff by lowering their price. A big retailer may have some leverage. You don’t. In fact, these citizens in this story didn’t even know the tariff was coming until it arrived:

Some shoppers are getting surprised with new fees from online purchases, sometimes days or weeks after ordering, as tariffs on Chinese goods hit U.S. consumers.

It’s not clear how widespread the issue is, but shoppers are reporting that they have been getting notices from carrier companies, including UPS and DHL, that they owe new fees, long after the purchase was made….

Packages worth less than $800 used to enter the country tariff-free, but as of May 2, those shipments from China are subject to tariffs….

Shoppers across the United States … report making purchases and then receiving a note from a carrier company informing them that they need to pay duties to receive the goods.

It’s not just goods from China, and the costs added by these taxes to your purchase price can be incendiary to your wallet:

Ben Dominguez-Benner, a programmer in Austin, received an email from UPS on May 2 with a bill for $137.42 for “fees and taxes” on a purchase he had made nearly a week earlier. He would need to pay the full amount to receive the $183 cord organizing system he’d bought from CRDBAG, a Swedish company.

The tariff part of that bill was itemized at $108.

If this 60% tariff were on a product purchased by a US retailer who then resold it, the tariff would get built into the price charged by the retailer and would show up later in inflation data as higher prices; however, when the final consumer purchases directly from abroad, the consumer sees what the retailer sees—a bill for the tariff taxed on the goods as they pass through port with the goods held hostage for payment. It never gets built into the price, but it’s the same increase in cost for the buyer as when the retailer builds it into the price.

Of course, good retailers or manufacturers don’t want to burn their customers with surprises like this, so many will be building these costs into their “shipping” costs, when purchases are made. For now, businesses are scrambling to figure out how to manage the tariffs, so some surprises are happening. Added into “shipping costs” they also might not make it into inflation statistics.

They can only show up as inflation in CPI under shipping if it is known what part of a shipment was hit by the tariff and what it was priced at in order to know how much the price rose; but that kind of detail might not be available for every item in a shipment. The government may also not be inclined to strain the data through that fine of a mesh since the government doesn’t want people to consider tariffs inflationary in the first place. So, these are stealth tariffs in that you don’t see them coming, and they may not show up in later inflation data.

UPS tells international shippers that if “the recipient will be responsible for these charges, we recommend you inform them of this before the transaction, to avoid any surprises.”

Consumers got used to shopping online without worrying exactly where their products were made, said Bernie Hart, vice president of customs at the logistics company Flexport. Ideally, businesses would adapt to showing all the fees online before shoppers pay, he said, so they aren’t surprised with a bill later.

Except that Trump balled Amazon out for itemizing tariffs like that, so Amazon recoiled and claimed it never intended to. Trump doesn’t want people constantly reminded that THEY are paying the tariff because he told them they wouldn’t; nor does he want them to see how much the tariff is.

So, if the tariff gets buried in prices, it’s inflation. If it hits your order and gets billed directly as a separate line item, I guess it’s just a new national sales tax you get to pay or you can call it a huge increase in the cost of shipping. Regardless, a rose by any other name … still means you are paying a lot more for what you are getting.

One person in the article just quoted mentions getting burned with a $1,000 surprise tariff when the goods arrived. Another mentions a glowing $1,700 surprise. So, be careful where you buy.

However, being careful won’t always help you either. One person made a purchase from Australia and got a big surprise:

This time, two shirts for $134 total had a line item for “duties” — adding $213 onto the price. Braucht checked the tags of the items she’d already received and found they were made in China. (This was before tariffs on Chinese goods were reduced to 30 percent.)

The tariff was way more than US tariffs on Australian goods where she placed the order … because the goods came originally from China! They didn’t get an exception by routing through Australia. US customs followed the product back to its original place of manufacture because it doesn’t want China doing end-runs.

Consumers in Europe and elsewhere may already be used to paying duties when receiving packages from abroad, said Maggie Barnett, CEO of the fulfillment company LVK Logistics. But it’s a new experience for U.S. shoppers, and it’s likely to leave a bad taste in people’s mouths. That’s why she expects brands to start baking in the tariff cost, or breaking it out as a line item.

Bottom line, however they do it: you pay. In a way, though, the stealth tariffs are less stealthy because, though they get to sneak up on you entirely (so are stealthy that way as well as potentially hidden from inflation statistics), once they hit you, you, at least, get to know exactly how much they were. Included in the price by retailers, you don’t know.

Head-on inflation

The other kind of inflation hits you head on—built right into the price but you don’t know how much of the price is due to the tariff. If you have been beguiled into believing the tariffs won’t pass on to prices via responsible retailers, who will surely follow the president’s orders and require their Chinese suppliers to adjust their prices so Americans don’t have to pay, you will find this snapshot of price increases from hell exhilarating.

A few tariffed products are already hitting shelves, and here is a first peak at what happened at one of the nation’s major stores with a solid reputation for holding down prices:

Old price v. new price.

This look into the gaping maw of inflation was posted by an employee at Target.

For months, big retailers have been warning that prices will rise.

Now, thanks to insider information from Target workers, the extent of the raises are becoming apparent. Staff say it is just the beginning….

'It's happening,' the worker wrote, sharing a photo of the price tag update. 'All of Heyday [a brand of electronic cables] is going up.'

The spike — an 80 percent increase — is being blamed on the latest wave of tariffs linked to President Donald Trump's trade policies….

Now THAT’S some scorching inflation! (But no surprise here at The Daily Doom.) The question yet to be grasped is what percentage of products will get hit like this?

For goods that rely on global supply chains — like electronics sold at Target — the effects are already showing up on store shelves….

Even sooner than I had suggested, except that I did say items low in inventory would price through ahead of things that had been successfully overstocked ahead of the tariffs. So, that is what we are now seeing—spotty appearances of items here and there that were low in supply—but those items reveal how big the tariff bite is going to be that is coming your way.

So far, the increases haven't made a major dent in national inflation data — April's rate moderately ticked up….

Some executives have warned that consumers will start to feel the impact more broadly in the months ahead.

Best Buy and Walmart's CEOs have both warned about higher prices.

That matches up with my statements that we would not likely to see many of the price changes start to come through until summer; but here you get a foretaste of what is to come.

Target’s CEO warned back in March that everyday items that cross borders — such as bananas, strawberries, coffee and avocados — will be increasing. He particularly warned that, if there is a 25% tariff, those prices WILL go up. Target isn’t going to try to eat that much in order to avoid price hikes. As you can now see in the photo above, those prices will go up a lot more than our previous bout with inflation. That was just the warm-up act.

Sadly, many people mistakenly thought we were finally about to leave behind the long inflation fight that resulted from Trump's Covid lockdowns and huge bailout programs and stimulus checks, which continued through the Biden administration. Now a whole new period of inflation is opening up that will have to be battled down all over again! Only this time, the Fed would have to tighten down on inflation during a recession, which it may be disinclined to do, as that will deepen the recession. It also knows it will not be able to tighten down on this inflation monstrosity successfully anyway because it is a government add-on, not a market-driven price increase. That would be like the Fed trying to tighten down on your income tax or raising interest rates to cut down your property tax. How’s that going to work?

So, unless and until the government backs off, these price increases will be here to stay. So far, the president still says they are going to remain as a new revenue source that “China will pay for” and that the present tariff levels are the floor, not the ceiling, for what we will eventually see. I think someone better school him on who pays.

Who could ask for anything more?

You’re scheduled to get a lot more, whether you ask for it or not. Today’s news just foreshadows what is to come.

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