The Federal Reserve Bank is facing a conundrum:

First, they [tariffs] raise prices, which weakens the case for cutting interest rates. Second, they sap confidence and demand, which strengthens the case.

There’s this, too:

In May, the Treasury Department collected roughly $15 billion more in customs duties than in February. That is equal to about 3% of total consumer spending on goods. Some goods prices have risen, but not by that much. And in May, prices fell on some obvious tariff targets such as apparel and new cars.
This is a head scratcher. If consumers aren’t paying the tariffs, who is? Not foreign producers, at least through April, when import prices excluding fuel rose. Not, apparently, retailers and wholesalers, whose margins took a hit in April but bounced back in May, according to the producer price report released Thursday [12 June].

For me, though, the head scratcher is straightforward: it’s been so long since we had significant tariffs, and economies have evolved so much in that interim, that we don’t yet understand the lags that are involved between the onset of tariffs and allegedly associated price increases. This is further contaminated by the confusion by folks who should know better of highly variable tariff rhetoric with actual tariffs in place.

And a second contaminant: how much do tariffs raise prices, really, in a global economy that has supply chains that are much more mobile (or at least much less fixed in place) than in those prior economic environments?

And a third: a measure of flexibility in cost transfer techniques: keeping prices stable while doing away with free shipping or raising existing shipping charges, for instance.

Oh, and energy costs are down; lowering prices here counterbalances, in the larger scheme, price increases there.