Contrary to widespread concerns, President Donald Trump’s tariffs have not yet been reflected in the conventional inflation metrics.

Indeed, recent separate reports on consumer and producer prices have been unexpectedly mild, with data from the Bureau of Labor Statistics showing that prices rose just 0.1% in May.

So, is the inflation scare over?

Not quite. In the coming months, price increases are still anticipated, driven by Trump’s aim to ensure fair trade for the U.S. However, so far, tariffs haven't broadly increased prices, except in areas particularly vulnerable to higher import costs.

Three main factors have so far helped keep inflation in check:

• Businesses stockpiling imported goods before the April 2 tariff announcement.
• The delay in tariffs affecting the real economy.
• The limited pricing power companies experience as consumers become more budget-conscious.

“We believe the limited tariff impact in May reflects pre-tariff stockpiling and a delayed pass-through of tariffs into import prices,” Aichi Amemiya, senior economist at Nomura, noted. “We continue to expect that the impact of tariffs will likely become evident in the coming months.”

This week’s data revealed isolated signs of tariff-induced pressures.

Prices for canned fruits and vegetables, which are often imported, increased by 1.9% for the month. Roasted coffee rose by 1.2%, and tobacco by 0.8%. Durable goods, such as major appliances (up 4.3%) and computers and related items (1.1%), also saw price hikes.

“The rise in appliance prices mirrors the situation during the 2018-20 round of import taxes, when imported washing machine costs surged,” Joseph Brusuelas, chief economist at RSM, noted in his daily market commentary.

However, a significant test remains: whether these price increases will be temporary or long-lasting, as many economists fear. This largely depends on consumers, who drive nearly 70% of economic activity.

The Federal Reserve’s recent economic activity report suggested potential price increases ahead, while noting that some companies were hesitant to pass on higher costs.

“We have long believed that tariffs would not be inflationary and were more likely to cause economic weakness and eventually deflation,” said Luke Tilley, chief economist at Wilmington Trust. “There’s considerable consumer weakness.”

Indeed, this is similar to what occurred with the harmful Smoot-Hawley tariffs in 1930, which many economists believe contributed to the Great Depression.

Tilley observed that consumers are already cutting back on vacations and leisure activities, suggesting that companies may not have the same pricing power they did when inflation began to rise in 2021.

Federal Reserve officials remain watchful over the summer to assess how tariffs affect prices. Markets largely expect the Fed to hold off until September before resuming interest rate cuts, even as inflation subsides and the employment situation shows signs of stress.

“If inflation proves to be temporary, the Federal Reserve may reduce its policy rate later this year,” Brusuelas said. “However, if consumers raise their own inflation expectations due to short-term price disruptions in food or other goods, it may be some time before the Fed cuts rates.”