One Simple Explanation Why Tariffs Have Not Been Causing Inflation, White House Says

Conservative News DailyJuly 9, 2025

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The summary of the article is as follows:

multiple White House officials explained that the tariffs imposed by president Donald Trump are not showing up as higher inflation in the U.S. because foreign producers are absorbing the additional costs instead of passing them on to consumers. The Bureau of Labor Statistics reported very low Consumer Price Index (CPI) increases in recent months, suggesting inflation remains subdued during Trump’s presidency compared to higher rates under President Biden.

In early April, trump announced a universal 10% tariff and higher reciprocal tariffs on certain countries that restrict U.S. goods, along with a 25% tariff on imported cars, steel, and aluminum. Some tariffs were temporarily paused during negotiations, but higher tariff rates are planned to take effect soon, with versatility if deals are reached.

Senior White House trade officials,including Peter Navarro and Stephen Miran,argue that the U.S. has strong leverage as the world’s largest consumer, forcing foreign producers to absorb tariff expenses to maintain market access without raising U.S. prices. This dynamic contributes to the absence of meaningful inflation despite the tariffs. Economic advisors stated that past tariff implementations, such as those on Chinese goods, did not cause meaningful inflation, and current data show that imports have decreased while inflation on affected goods has fallen.

the administration views the tariffs as part of a structural reset in international trade more favorable to the U.S., addressing the large trade deficit and helping preserve American jobs and factories.

Multiple White House officials identified the reason that President Donald Trump’s tariffs are not showing up in the inflation data: the producers of goods in their countries of origin are eating the cost.

The Bureau of Labor Statistics reported last month that the Consumer Price Index rose just 0.1 percent in May, after rising 0.2 percent in April.

If the current inflation rate keeps up, it will only be 1.4 percent annually for Trump versus the 3.1 percent annualized rate under Biden during his last 30 months in office.

Inflation during Trump’s 2nd term is an annualized 1.4%, which is less than the ’09-’20 average of 1.8% and less than half the 3.1% annualized rate during Biden’s last 30 months – to say nothing of the 8.6% rate during Biden’s first 18 months… pic.twitter.com/bAZNJ2K55c

— E.J. Antoni, Ph.D. (@RealEJAntoni) June 11, 2025

In early April, Trump announced his “Liberation Day” universal 10 percent tariff and higher reciprocal tariffs for those countries his administration identified as being particularly egregious in blocking U.S. products from their markets.

Soon thereafter, he decided to pause the higher tariff rates for 90 days until July 9, as negotiations proceeded. The president also placed a 25 percent tariff on imported cars, steel, and aluminum.

This week, Trump has been notifying several countries of what their tariff rates will be starting August 1, but added that they could be lowered if negotiators strike a deal. For example, as things stand now, he said goods imported from South Korea and Japan will be charged 25 percent.

White House senior counsel for trade and manufacturing, Peter Navarro, told Fox Business on Wednesday, “Let’s always keep the big prize in mind. We have over a trillion dollar trade deficit every year. And that costs us jobs and factories.”

“And what President Trump is doing is a fundamental, structural reset of how international trade works. And it’s going to work to our advantage rather than their advantage,” he added.

Navarro said the tariff rates will likely end up being 25 – 40 percent for most countries.

“I think the key thing here, and why [Federal Reserve Chairman] Jay Powell is so wrong about not lowering [interest] rates, is to recognize the enormous ability of the world to absorb the tariffs,” he contended.

“It’s like Navarro’s law, the bigger the screw job we’re getting from any given country, the more that country is able to absorb the tariffs. The more they cheat us, the more they can absorb the tariffs,” the White House official asserted.

“And that’s what we’re seeing. We’re seeing the tariffs from countries around the world, and we’re not seeing inflation, because basically, they’re eating the tariffs,” Navarro concluded.

Similarly, White House Council of Economic Advisors Chair Stephen Miran told Fox Business, “We ran this experiment already. We know what happens. We lived through it in 2018 and 2019. … There was zero economic evidence of meaningful inflation in the first term from the China tariffs. And again, to date, there is no evidence of it.”

The Trump administration imposed a 25 percent tariff on Chinese imports starting in 2019. China remained the second-largest exporter of goods to the U.S. in 2024.

“The United States has all the leverage here,” Miran said. “Other countries have no alternative options to selling to the United States, and that is part of why we don’t have any inflation from the tariffs, thus far, because we have the leverage.

“We have the bargaining power. That means that other countries have to accept those lower prices when they sell things to us, and they end up eating the costs of the tariffs.”

Joe Lavorgna — counselor to Treasury Secretary Scott Bessent — told FBN’s Larry Kudlow on Tuesday following April’s new tariffs, “Imports of goods were down, and the Consumer Price Index fell even more. So it’s not even like inflation is under 2 percent; it actually fell for those goods that were supposed to go up because of the tariffs. It’s remarkable.”

Counselor to @SecScottBessent @Lavorgnanomics: “Imports of goods were down, and the Consumer Price Index fell even more. So it’s not even like inflation is under 2%, it actually fell for those goods that were supposed to go up because of the tariffs. It’s remarkable. And it… pic.twitter.com/ACE9oybhZQ

— Treasury Department (@USTreasury) July 9, 2025

“And it reflects the fact that foreign producers have absorbed this,” he continued. “The U.S. being the biggest consumer in the world really dictates the terms, and President Trump knows that.”