Over the past two years, disinflation in the price of goods, and, in some cases, outright deflation allowed the economy to avoid a recession and for unemployment to decline into what is widely acknowledged as full employment.
But this relative price stability is now at risk with the prospect of 25% tariffs on all imports of steel and aluminum. The tariffs were announced on Feb. 10 and are to take effect on March 12.
It is why economists like me have stepped up their research to ascertain if disinflation is indeed dead and how that affects the risk matrix around the economy.
Consider the price of steel rebar, which jumped on Feb. 7. It was a foreshadowing of things that could come should those trade taxes be implemented.
Businesses are not waiting for the actual tariffs to take effect. I am talking to small and medium-sized firms that are telling us they are getting notices of rising prices ahead of the actual implementation of tariffs on such items as steel and aluminum.
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Those clients are in turn telling me that they intend to either partially or fully pass along those costs—that means 25% in this case—ahead of March 12, whatever decision is reached in Washington.
The uncertainty is also affecting decisions on major investments. Ford, for example, is delaying the launch of its next-generation F-150 from 2027 until the middle of 2028, Automotive News reported. The report follows comments last week by its chief executive, Jim Farley, that the proposed tariffs could “blow a hole” in the American auto industry.
That is the price of the uncertainty tax that businesses are facing.
