Skip to main content
trade

How will the global trade war affect consumers? Keep an eye on U.S. producer prices.

Those figures “will be the canary in the coal mine” for evaluating the effect of U.S. tariffs, Scotiabank chief economist Derek Holt wrote Wednesday in a research note.

Essentially, producer prices show what companies receive for their output. This is key because, as the trade war intensifies and encompasses a growing list of goods, producers that import affected items will see their costs rise. Eventually, costs will be passed onto consumers.

U.S. producer prices for final demand jumped 3.3 per cent in June from a year ago, the highest pace since 2011, data released Wednesday show. The uptick was driven by higher energy and transportation costs.



“There were also signs that the steel and aluminum tariffs have begun to push up firms’ input costs, and it is likely to be only a matter of time before that shows up in higher consumer prices too,” Michael Pearce, senior U.S. economist at Capital Economics, wrote in a client note.

The trade war escalated Tuesday as U.S. President Donald Trump threatened to impose tariffs on US$200-billion of Chinese goods, following tit-for-tat measures that went into effect last week. The U.S. is waging its trade war on several fronts, including with Canada, and renegotiations of the North American free-trade agreement are ongoing.

At least one niche product is already showing the impact of tariffs: washing machines. U.S. consumer prices for laundry equipment climbed 7.4 per cent in May from a month earlier, following a 9.6-per-cent surge in April. Mr. Trump slapped a 20-per-cent tariff on washing machine imports in January.



Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe