CPI meals at house is 8% of complete CPI weights, recent greens and fruit are 1.1%. Assume half of recent vegetable and fruit are imported from Mexico (about 2/3 of recent greens are imported from Mexico), and assume solely half of the 25% tariff is handed on to US shoppers (giant nation assumption). Then right here’s an image of the CPI for groceries, the January USDA ERS forecast and the implied degree of grocery costs, assuming the tariffs are ultimately positioned.
Determine 1: CPI for meals at residence (black), USDA Financial Analysis Service forecast (blue sq.), implied degree together with tariffs on Mexican meals imports (pink triangle). Supply: BLS through FRED, ERS, creator’s calculations.
The article of tariffs is to lift costs going to home producers, to encourage manufacturing. Therefore, assuming that home producers don’t increase costs (as is assumed within the above calculation) appears foolish — so the above is an understatement of value improve.
