CPI meals at house is 8% of whole CPI weights, contemporary greens and fruit are 1.1%. Assume half of contemporary vegetable and fruit are imported from Mexico (about 2/3 of contemporary greens are imported from Mexico), and assume solely half of the 25% tariff is handed on to US shoppers (massive nation assumption). Then right here’s an image of the CPI for groceries, the January USDA ERS forecast and the implied stage 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 stage together with tariffs on Mexican meals imports (crimson triangle). Supply: BLS by way of FRED, ERS, creator’s calculations.
The item of tariffs is to boost 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 worth improve.
