American definitions may cool inflation for the rest of the world

In the United States, tariffs have not raised prices as expected, so far, but inflation is still higher, which represents an obstacle to discounts in expected prices from the federal reserve.

The Consumer Prices Index (CPI) increased at an annual rate of 2.7 % in July, less than expectations to make a 2.8 % profit and speed in June. But the basic consumer price index is still accelerating to 3.1 % of 2.9 %, and Capital Economics expects the impact of definitions on a gradual increase during the remaining period of the year.

Outside the United States, however, the image looks different.

“We doubt that the American customs tariff will significantly affect inflation in the rest of the world, but if there is anything, the effect may be moderately incompatible.”

This is because most countries did not take revenge on Trump’s tariff for their duties on American goods. In some cases, the fees on American imports have already decreased.

For example, in the commercial deal that Trump negotiated with Indonesia, a country of Southeast Asia has agreed to eliminate definitions on almost all American goods. But the United States imposed a 19 % duty on Indonesian imports.

“What’s more, the strike must weaken the global demand for price pressures, on the margin, while redirecting Chinese exports away from the United States to other markets may reduce import prices,” added Capital Economics.

On the contrary, more inflationary pressure appears to be directed to American consumers. Although companies have not passed a lot of tariff costs, this cannot last longer.

Retail dealers were ready to accommodate the initial cost of tariffs by sacrificing their margins, and that investigative studies indicate that American companies have witnessed a significant increase in costs – unlike the rest of the world.

They added: “With the agreement of many commercial deals, there is now a greater certainty about the place where the definitions will end, which must allow retailers to finally raise their prices.”

Disruptcy in China

All economies will not face definitions in the same way. In fact, China will have a more severe impact because the American definitions on Beijing are more slope than most other countries.

This is an intuitive shock to the second largest economy in the world, according to Robin Brooks, an older colleague at the Brookings Institute and former chief economist at the International Finance Institute.

China’s economy is already joking with shrinkage, as consumers’ prices were in the event of low prices of producers. The trade war must exacerbate the situation.

Brooks wrote in a Post Stlick post last month. He believes that China uses nearby countries that face less duties to transport goods to the United States, while increasing exports to other non -American markets as a final destination.

Both put back down pressure on China. Transshiping exports in the third countries add transportation costs and reduce profits to Chinese companies. Meanwhile, the export of more goods to other markets requires that prices be decreased to generate demand.

“In both cases, the profitability of the Chinese exporters is negatively damaged,” Bruks explained. “For a country like China, which relies heavily on export and already depends on contraction, this is a worrying possibility.”

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