A new analysis from economist Bob Elliott warns that a “surge in tariff related price hikes” is keeping inflation “stuck above 3%,” effectively wiping out any disinflationary relief consumers were seeing from falling rents.
Tariffs Are Fueling ‘Price Hikes’ While Squeezing Household Spending
In a Substack note, the CEO of Unlimited Funds argued this dynamic is “creating a squeeze on household spending” as prices for goods soar.
However, the analysis, which details how tariff costs are working “through supply chains,” drew a sharp rebuttal from Treasury Secretary Scott Bessent.
In a video posted to X, Bessent accused critics of “cherry-pick[ing]” data to paint a one-sided, negative picture of the economy.
“You don’t get to cherry pick,” Bessent stated. “Inflation is a composite number.” He argued the Donald Trump administration is successfully taming the “terrible affordability crisis” it inherited, pointing to falling prices for items like eggs and gasoline.
See Also: Trump Tariffs May Fuel Margin Squeeze, But Not Inflation, Economist Says
Tariff-Induced Price ‘Surge’ Offsets Rent Relief?
“Rents are coming down,” Bessent insisted, highlighting the most recent monthly core inflation figure of 0.2% as “the lowest that has been in a long time.”
Elliott’s note, however, uses private-sector charts to argue that this focus on rents is misleading.
He claims the “steady disinflationary pressure coming from calculated rents… is being more than offset” by the new tariff-related inflation. His analysis points to data showing record-high new car prices and a “notable uptick in prices” for both domestic and imported goods.
A Disconnect In The Inflation Debate
The clash highlights a key disconnect in the inflation debate. The Federal Reserve and the administration have signaled they will “look through” the tariff hikes, with Jerome Powell viewing them as a “one-time shift in the price level” rather than a permanent trend.
But as Elliott’s note concludes, while policymakers can ignore the price hikes for setting policy, “households and businesses cannot.”
On Monday, the futures of the S&P 500, Dow Jones, and Nasdaq 100 indices were trading higher.
Meanwhile, on Friday, the S&P 500 index ended 0.79% higher at 6,791.69, whereas the Nasdaq 100 index rose 1.04% to 25,358.16. On the other hand, Dow Jones advanced 1.01% to end at 47,207.12.
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