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● Inflation truth-bomb.

Key Takeaways from the Fed Report on Tariff Impact Analysis

Changes in Tariff and Price Pass-Through Effects – A Comparison of the Past and Present

The Fed's latest report re-analyzes the impact of tariffs on prices compared to the first term of the Trump administration.
In the past, analysis by Cleardia 3 between 2018 and 2019 showed that tariffs were strongly passed on to consumer prices.
Regression analysis showed a slope of 2, whereas this cycle's analysis of Chinese imports showed a lower beta value of 0.54.
This difference is due to the reduced proportion of Chinese goods and the different price pressures in the deflationary environment at the time.
Meanwhile, price increases after tariffs were imposed were passed on at an average rate of within two months.

Report Analysis – Tariff Scope and Industry-Specific Impact

The Fed report assumes a 20% tariff on Chinese goods.
It was observed that Chinese tariffs raised the Consumer Price Index (CPI) by 0.08-0.1 percentage points.
Unlike in the past, when companies used tariffs as an excuse to raise prices more than usual, the effect is now reduced due to consumer resistance and supply chain variables.
In particular, the tariff effect is minimal for some items such as home appliances and auto parts, and complex factors such as consumer slowdown and exchange rate effects are at play.
At the same time, the price pass-through effect of Chinese tariffs may be further reduced if the possibility of importing substitutes increases.

Future Economic Outlook and the Role of the Fed and Policy Variables

Through this report, the Fed and Chairman Powell signaled that the effect of tariff increases has already been reflected in prices, and that there is a possibility of further pass-through in the future.
According to the report, the effect of the first Chinese tariff, which went into effect in early February, was reflected in import costs from March, and additional effects may be observed after April.
At the same time, Fed officials pointed out that tariff increases could exacerbate global supply chain disruptions and inflationary pressures, and mentioned the possibility of economic growth slowing, especially the impact on small and medium-sized enterprises.
Given the uncertainty of the current economic environment, interest rate policy remains restrictive.
All of this naturally incorporates key SEO keywords such as Fed, tariffs, inflation, economic growth, and exchange rates, suggesting a wide range of impacts on the overall economy.

< Summary >

The Fed report noted that the pass-through effect of tariffs on prices was lower in this cycle (slope 2) than in the past.
The effect of tariff increases has been reduced due to variables such as a decrease in the proportion of Chinese goods, consumer resistance, and the emergence of substitutes.
According to the report, the initial tariff effect is reflected within two months, and there is a possibility of additional pass-through after April.
While guarding against global supply chain disruptions and the possibility of slower economic growth, interest rate policy is currently restrictive.

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*YouTube Source: [Maeil Business Newspaper]

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