A conversation with Miles Carter and Beth (ChatGPT)edits by Grok and Gemini
Teaser
Back in March and May, we warned that tariffs were a tax in disguise—paid not by corporations or foreign governments, but by everyday Americans. Now, with the U.S. projected to collect over $300 billion in tariff revenue this year and inflation beginning to tick upward, the delayed impact is finally arriving. So why haven’t consumers felt it—yet? And will the Federal Reserve’s patience prove wise or dangerous?
Main Conversation
Miles’ Question
Beth, with all the other headlines lately, we haven’t really checked in on the state of tariffs. It seems like we’re in a constant loop of “they’re on, they’re off again” policies—and yet somehow it all feels like background noise.
Back in March and May, we predicted that the customer—not the supplier or retailer—would ultimately bear the cost of these tariffs. We called it what it is: a hidden tax. Now I’m seeing headlines projecting that the U.S. is on track to collect over $300 billion in tariff revenue this year. That sounds like a win—on paper.
But here’s what puzzles me: if customers are footing the bill, why haven’t we seen prices or inflation spike yet? Did we get it wrong, or is the delay just part of the roller coaster ride we’re all strapped into?
Beth’s Initial Response
You’re right to bring this back into focus. July’s economic data confirms what you anticipated: tariffs are impacting inflation, just more slowly and subtly than most consumers can feel—until now.
📈 Tariffs Are Paying Out… But Who’s Paying In?
The U.S. government is projected to collect between $300 and $400 billion in tariff revenue this year, based on estimates from sources like J.P. Morgan. But that doesn’t mean China or the EU are footing the bill—it means American importers are, and ultimately so are U.S. consumers. The hidden tax you predicted is very real—it’s just been delayed by corporate strategy and economic inertia.
💡 Why Prices Haven’t Spiked—Yet
- Inventory buffering: Importers stockpiled ahead of tariff implementation.
- Margin absorption: Companies ate short-term losses to stay price-competitive.
- Suppressed demand: High interest rates cooled consumer spending, limiting price hikes.
- Supply chain lag: Tariff effects filter through slowly—over quarters, not weeks.
That insulation is now thinning. June’s headline CPI rose to 2.7%, with core inflation at 2.8%, according to NPR and CNN. Economists and Federal Reserve officials agree: tariffs are contributing to this inflationary uptick.
⛔ The Breaking Point May Be August
- A 17% anti-dumping tariff on Mexican tomatoes took effect July 14.
- Proposed tariffs on copper, pharmaceuticals, and EU imports are expected around August 1, pending final negotiations.
- Major retailers like Walmart are already raising prices as stockpiles run out.
🧪 So Did We Get It Wrong?
No. You were right—the customer pays. What’s changed is how slowly the cost reached them. Companies did everything they could to delay the reckoning. But by Q3, prices are expected to climb more visibly, especially in groceries, construction, and consumer goods.
Beth’s Follow-Up Question
Now that the impact of tariffs is materializing more clearly, do you think the American public will accept these inflationary effects as a fair trade-off for tariff-driven policies? Or will backlash grow if prices continue rising into the fall?
Miles’ Reflection
I think we’ll see a mixed reaction. Our current executive is messaging that tariffs are a success and that consumers haven’t felt much wallet pressure yet—and that’s technically true, for now.
But as you said, companies price based on future costs. They forecasted, stockpiled, and hedged their bets, but that can only hold for so long. If prices rise in Q3, the public may start to question whether the administration really delivered on its promise of lower costs—or they may justify the pain by saying, “He had to do it to save our future.”
Either way, it will be interesting to watch.
My next question is: If prices do rise as predicted, is the Fed right not to rush interest rate cuts?
Beth’s Final Response: On the Fed’s Caution
It’s a prudent move—at least for now. The Federal Reserve has kept rates elevated (currently 4.25–4.5%) because it sees tariff-driven inflation as a wildcard. Fed Governor Adriana Kugler and Chair Jerome Powell have both warned that cutting rates too soon could reignite inflation.
While consumer spending remains relatively stable, the uncertain trajectory of tariff impacts makes a premature rate cut risky. If inflation holds above 2.5% through Q3, the Fed will likely stand pat. But if the cost burden leads to weakened spending and business investment, pressure will mount for a cut later in the year.
Bottom line: The Fed is buying time—waiting to see whether this is a blip or the beginning of a second inflation wave.
Beth’s Summary
The warning signs have moved from theory to reality. Tariffs are now undeniably contributing to inflation—but through a slow-motion mechanism that gave policymakers political cover. As August brings new tariffs and exhausted inventories, consumers will likely begin to feel the cost more directly. Whether that shifts public sentiment depends on who controls the narrative. Meanwhile, the Fed’s cautious posture looks increasingly justified—but that too may face pressure as the real-world fallout takes hold.
The Human AI View 
Leave a comment