exports

The Looming ‍Cost of Trade⁣ Barriers: Inflation, Stagnation, and a Shifting Global Landscape

The initial impact of recent tariffs is already being felt in rising prices. The US producer price index ⁤saw​ a notable jump of 0.9% in July 2025 – the largest increase in over three years – and with the temporary tariff pause ‌nearing its end (excluding China)‌ and pre-tariff stockpiles dwindling, further price hikes are almost ⁤certain. this isn’t limited to directly impacted goods; domestically⁢ produced alternatives are also likely to see price⁢ increases, amplifying inflationary pressures across the ⁢board.

these initial price increases are just‍ the beginning. A second-round effect is now taking ​hold, as higher costs for imported components ripple through manufacturing supply chains. This will not only ⁣exacerbate inflation but also diminish the competitiveness of US exports ⁤reliant on these inputs.

the consequences extend beyond simple price increases. Rising living costs will inevitably fuel ⁢demands for‍ higher wages, perhaps triggering a dangerous wage-price ‍spiral. if ​this leads to ‌widespread inflationary expectations,it could create a ⁢self-reinforcing cycle,pushing inflation to⁤ unsustainable levels. Controlling this would likely require monetary tightening,a move that would inevitably slow economic growth.

While the US hopes exporters will absorb the‍ tariff costs to⁢ maintain market share, evidence suggests​ this is a flawed assumption. International experience, and emerging data from the current tariffs, indicate that these costs‌ are largely being passed⁤ on to consumers. This means the US faces a bleak ​outlook: rising inflation, widening inequality, and a slowdown in economic growth -⁢ a dangerous combination that raises the specter of stagflation.

Looking ahead, ⁤trade partners are understandably seeking to diversify away from the US market. Southeast Asia, in particular, ⁤is already demonstrating a willingness to explore​ alternative trade relationships. while adjusting away ⁤from a market as‌ large as the US will involve short-term costs, these will diminish over time. As ‌competition for access to the US market eases, the⁣ pressure on exporters to absorb tariff costs will also lessen.

Ultimately, the likely ‌outcome is ‌a double⁤ blow for American consumers:⁤ higher prices and reduced product choices. The belief that tariffs can be a painless solution is proving to be a costly miscalculation, with the potential to harm not only​ the US ‌economy but the global economic landscape as well. Southeast Asian exporters, while potentially facing some short-term volume declines if US growth falters, are positioned⁣ to maintain profitability, particularly as they are less likely to need‍ to‍ absorb the tariff burden.

Jayant Menon is a Visiting ⁢Senior‌ Fellow in the‌ Regional Economic Studies ⁣Program at the ISEAS – Yusof Ishak Institute. This commentary first appeared on the Institute’s blog, Fulcrum.

Key changes and how they ⁤preserve the original meaning:

Re-ordered facts: the flow is more logical, starting with immediate effects and moving to longer-term consequences.
Stronger, more direct language: Phrases‌ like “almost certain” and ⁣”dangerous combination” create a more impactful tone.
Expanded explanations: Concepts like the wage-price spiral and second-round effects are explained more‍ fully.
Originality: The text is entirely re-written,⁣ avoiding direct copying of‍ phrases while retaining all the core⁢ arguments and information.
Preserved core arguments: The central thesis – that tariffs will likely not be absorbed by⁢ exporters and will lead ⁤to negative consequences for the US – remains ​unchanged.
Maintained attribution: The author and source ⁢are still clearly credited.