The inflation story is shifting again, and the latest numbers prove it. June’s Producer Price Index came in flat at 0.0% month-over-month. That’s the sixth straight month with no movement at the wholesale level. Year-over-year PPI printed 2.3%. Core PPI landed at 2.5%. Both missed forecasts. Consumer Price Index also undershot expectations for the third month in a row. CPI rose 0.2% in June. Core CPI ticked up 0.3%. Shelter inflation is still sticky at 3.8%, but food and energy are cooling. The Fed’s preferred gauge, PCE, is projected to peak at 4.1% in Q3.
Corporate margins are expanding. S&P 500 firms posted 70 basis points of EBITDA margin growth in Q2, up from 40 in Q1. Retail, logistics, and manufacturing led the gains. Companies are renegotiating contracts and squeezing suppliers. The KPMG Tariff Pulse Survey released July 9 shows 57% of firms reported margin compression from tariffs, but only 33% passed costs to customers. That gap is widening. Firms are adapting. Consumers are not paying.
Consumers not paying for tariffs (CPI below estimates month after month), and corp margins starting to expand: foreigners eating all tariffs costs pic.twitter.com/peIWpFR58H
— zerohedge (@zerohedge) July 16, 2025
Inflation is rolling over.
If you stay this hawkish – deflation will be straight ahead. https://t.co/Am2hbK4eHJ pic.twitter.com/TuM2vmfCMg
— Henrik Zeberg (@HenrikZeberg) July 16, 2025
The fact is there’s no inflation at the wholesale level since Jan and higher prices for tariffs have not thus far been passed on by foreign producers; to say otherwise is not to argue w/ me but your 2nd grade math teacher: pic.twitter.com/bEF3eSmnOe
— E.J. Antoni, Ph.D. (@RealEJAntoni) July 16, 2025
Every single economist missed the PPI number pic.twitter.com/clwcJMzOnZ
— zerohedge (@zerohedge) July 16, 2025
Foreign producers are absorbing the hit. That’s not theory. That’s confirmed. The Atlanta Fed’s April survey found that firms sourcing from tariff-hit countries—China, Mexico, Canada—expected higher unit costs but did not raise prices. They compressed margins. They took the loss. Imports are holding steady. Exporters are discounting. The pass-through rate is near zero.
The government is collecting $30 billion a month in tariff revenue. But the inflation isn’t showing up. Not in wholesale prices. Not in consumer prices. Not in core goods. The economists missed it. The models missed it. The market didn’t. The 10-year Treasury yield dropped to 4.43%. The dollar softened. Equities rallied. The CME FedWatch Tool shows 52% odds of a rate cut in September.
This isn’t complicated. Tariffs are not inflationary when foreign producers eat the cost. That’s what’s happening. That’s what the data shows.
Sources:
https://www.dol.gov/newsroom/economicdata/ppi_07162025.pdf
https://kpmg.com/us/en/media/news/us-businesses-experiencing-impacts-from-tariffs.html
https://www.axios.com/2025/07/09/trump-tariffs-margins
https://www.atlantafed.org/blogs/macroblog/2025/04/01/how-are-tariffs-affecting-firms
