Feel the Heat: The Inflation Monster Returned Like the First Heat Wave of Summer

The TACO trade is the new action on Wall Street where investors are betting against everything Trump says about tariffs because surely he is stalling in order to avoid putting high tax-intensifying, inflation-fanning tariffs on American consumers. The market has complacently disregarded tariff news lately, blithely certain that each tariff stall cannot possibly result in higher tariffs than those currently in place, even though the very few deals that have been struck so far have all been for higher tariffs.

(Yes, fewer than nine deals in more than ninety days; not the “ninety deals in ninety days” Peter Bizarro Navarro talked about as he was puffing on his opium pipe while hatching the president’s phone, which was supposedly ringing off the hook with wannabe dealmakers. Bizarro was one of many who repeatedly told the press that tariffs do not cause prices to heat up. But, whoa, what was that sudden flare felt throughout the stock exchange today?)

The risks for TACO traders played out splendidly as soon as the news about inflation started to edge upward in today’s report for June, showing a hint of the real cost of tariffs and who pays for them. That whiff of smoking truth took TACO stocks down because the market never sensed anything coming, though it is hard to see how investors and analysts missed sensing it, since it smelled like dead fish on a sizzling sidewalk, other than they just didn’t want to:

“The latest U.S. inflation report practically confirmed that President Trump’s tariffs acted to push up consumer prices in June,” said Matthew Ryan, head of market strategy at global financial services firm Ebuy.

“While there was a mild miss in the core number, both the main and underlying inflation measures are now printing at their highest levels in four months. The big fear for Fed officials is that stormier waters lie ahead, as not only is there a time lag between the tariffs and an increase to prices, but additional tariff hikes on 1st August would almost certainly herald further inflationary pressures ahead,” Ryan added.

You see, while Zero Hedge scoffed off the tariff-based inflation today on the basis that they said it was never going to happen (and that the inflation reported was too small to mean anything in their view), I’ll point out that a minor bump in June inflation arriving in the July report fits exactly with what I’ve said you’d see. Due to the very lag time that the article above now notes, I repeatedly laid out a timeline that said tariff-based inflation would not start to hit shelves until “early summer,” which would be the last ten days of June. It would not show up significantly, I said, until data for July gets reported in August. So, just a trickle starting to show up for June, as reported now in July, is perfect because …

It means my timing, given back in March, for inflation to hit the shelves in “early summer” proved to be correct. You should only see only a hint of inflation starting back up in the July reports for June if merchandise that was hit with tariffs started to hit shelves around the end of June as I said it would after the merchandise worked its way across the ocean, through docks, onto trucks and trains and through warehouses and finally through existing inventory to ultimately get priced for sale on the shelves. That is exactly what is now being reported. Because tariff-based inflation began to show up on the shelves in late June, it gave a trickle of rise for the month overall.

Stocks instantly caught wind of the threat because investors had latent fears of the inflation they were pretending would never come. So, today’s hint of the return of the inflation monster scared them, giving the TACO traders a bit of a defibrillating jolt, which they badly needed. However, today’s inflation report was nothing compared to what you’ll see reported for July in August, and even that will just be the training-wheels version because there will still be a LOT more merchandise that hasn’t plowed its way across oceans and through old inventory to wind up before blood-shot consumer eyeballs even in July. Then the data for August, to be reported in September, will be hotter still because many of the higher tariffs don’t start until August 1; however, that blow torch will also hit with a long lag as products ordered in August make their way to consumers. So, expect a monster heat wave of inflation to start building through the end of summer, growing relentlessly worse all through the fall.

Yet, just wait until the Christmas merchandise that gets ordered in July—right as tariffs in China have been cemented in place—hits the shelves for the holidays. That’ll be fun! (Well “cemented” until they get raised again by tyrannical Trump, the King of Chaos.)

Skyler Weinand, chief investment officer of Regan Capital, said it was a relief to see Tuesday’s CPI report coming in-line with expectations, but that “it’s highly likely that a tariff-driven inflation reckoning is coming.”

It was a relief that inflation wasn’t hotter because expectations by economists were already raised to anticipate the first wave of tariff heat in prices. So, yeah, the TACO-crazed stock market has a LOT of reckoning to do. They have bet on what they want to believe, not on what Trump has told them again and again is coming for tariffs, and they seem to have been betting that Team Trump was right that tariffs wouldn’t raise prices. Of course, Trump’s spasmodic approach to on-again/off-again tariffs has given the market the catnip it needed to go crazy. He’s teased markets all over the place, and they were more than willing to be seduced by him.

Everything slows down during a heat wave

On the earnings front, reports from several financial heavyweights failed to impress investors.

Of course, earnings failed to impress because the economy is going into recession, as I also forecast for this year. We already saw the first quarter go into recession. We may see a bump back out of that due to all the front-running of tariffs providing sporadic jolts of rapidly accelerated economic activity by businesses and consumers, which is borrowed from future activity, because people who wisely stock up on necessities now before the tariff-inflation hits buy less in the future. So, we pulled enough economic activity into the second quarter to bump our heads back above the recession sewers we settled into in Q1, but that just deepens where we’ll end in Q3 as the frontrunning fizzles, and today’s overstocking means less buying down the road.

You see, consumers have been a lot smarter than any of the people on Team Trump. Watch the video in the headlines below where I noted that Trump’s head of commerce, Howard Lutnik (the very guy who should understand the basic math on how businesses pass their cost increases on to consumers), proves himself to be dumber than anyone who watched the Epstein video and believed it actually proved Epstein killed himself. Sec’y of Commerce Howard Sputnik proves himself to be dumber than a blowfish … or he’s just a blowhard full of lies. Listen to this exchange, especially the last line where he repeats his constant lie (or lunacy):

[CNBC:] It feels like the market’s not believing that the worst of the tariffs is going to happen…. Is the market getting it right … because a lot of investors are watching the market go up, up, up?

[Sputnik:] President Trump is smashing down the barriers that have held American businesses back for eighty years! Tariffs were ON AMERICA, so when we tried to sell elsewhere there were tariffs; and when they tried to sell here, no tariffs…. President Trump is reversing that trend. Zero tariffs … those are the deals he’s made … He announced Indonesia this morning. No tariffs there! THEY PAY TARIFFS HERE.

No they don’t! WE pay tariffs here on the products we buy from them. So, great news: Trump has strong-armed them into zero taxes on their own people and into letting him tax our people at a much higher rate! I don’t know if Sputnik is actually so stupid he believed THEY PAY the tariffs the United State’s charges on their merchandise when it enters the US or if he knows he is lying through his clenched teeth when he claims “THEY PAY.” NO, THEY DO NOT.

They’ve agreed to place no excise taxes on their own people. We’ve agreed to place extreme excise taxes on ours. That is what a tariff is—a sales tax placed on goods sold inside our country that gets applied to the price before the consumer makes the purchase. It’s a form of excise tax.

Trump avoided saying what the new consumption tax paid by Americans for Indonesian goods will be, but rest assured it was a nice big one like he likes to brag about. I wonder, of course, if Trump’s rush to announce a “deal” with Indonesia today will turn out like the one he announced with Vietnam, which Sputnik also mentions, which was where Trump laid out what the new tax would be and then Vietnam said it had no idea it had agreed to a deal!

Vietnamese officials were reportedly surprised about Trump’s description of their preliminary deal with the U.S. As of July 10, the Vietnamese government still has not formally accepted part of the deal Trump touted, Politico reported.

It is worth reading the Politico report to see what a farce Trump’s announcement of what was only his second deal in nearly ninety days really was as he needed to show some shred of progress ahead of his self-imposed deadline! Maybe Indonesia will suddenly realize it has not agreed to a deal, too. Either way, we have agreed to tax our people a lot more because our people are the only ones we can tax. Believe it or not, we are not able to collect taxes inside of Vietnam or Indonesia. We have to collect them from our own people by taxing our own people. That is, apparently, still news to all the members of Team Trump, such as Howard Lunatic, who continue to say the other countries are paying our tariffs for us. Other nations may be suffering because we buy fewer of their tariffed products, but we’re suffering by paying more for everything we get from them. That’s how it works, but the liars keep flapping their lips, hoping that lip flapping creates new truth.

So, while June is too soon to see anything more than the initial trickle of this tax on American businesses, the trickle is coming through prices exactly on the schedule and scale I laid out.

Inflation rose last month to its highest level since February as President Donald Trump’s sweeping tariffs push up the cost of everything from groceries and clothes to furniture and appliances.

Consumer prices rose 2.7% in June from a year earlier, the Labor Department said Tuesday, up from an annual increase of 2.4% in May. On a monthly basis, prices climbed 0.3% from May to June, after rising just 0.1% the previous month….

Excluding volatile food and energy, core inflation increased 2.9% in June from a year earlier, up from 2.8% in May….

Grocery prices increased 0.3% [month on month]. Appliance prices jumped for the third straight month. Toys, clothes, audio equipment, shoes, and sporting goods all got more expensive, and are all heavily imported.

“You are starting to see scattered bits of the tariff inflation regime filter in,” said Eric Winograd, chief economist at asset management firm AllianceBernstein, who added that the cost of long-lasting goods rose last month, compared with a year ago, for the first time in about three years….

“Consumer Prices LOW,” Trump posted on Truth Social. “Bring down the Fed Rate, NOW!!!”

These guys just cannot lie fast enough. As the tariffs finally get settled into place with deals and fake deals (where nations did not sign a deal), the lies will become much harder to tell. The trickle rate of June—entirely expected in any reasonable forecast of the lag effect between tariffs and price increases—still gives the liars a little room to try to slide the lie through for another month. It will be a different story in August.

And, if you want to really see inflation, think of what would happen if Powell took Trump’s bait!

Many businesses built up a stockpile of goods this spring and were able to delay price hikes, while others likely waited to see if the duties would become permanent.

More businesses now appear to be throwing in the towel and passing on costs to consumers, including Walmart, the world’s largest retailer, which has said it raised prices in June. Automaker Mitsubishi said last month that it was lifting prices by an average of 2.1% in response to the duties, and Nike has said it would implement “surgical” price hikes.

Only Howard Lunatic and any lunatics who follow him would refuse to believe companies that TELL YOU they are going to raise prices. After all, announcing price increases is the last thing any company wants to do: “Hey, Everybody! We’re about to get a lot more expensive over here! Come shop with us!”

I have 100% confidence my major predictions for this year are coming true BECAUSE major international companies are now cueing up to tell you those predictions are coming true. They have already announced their coming price increases. So, Lutnik is a lunatic and Zero Hedge is enumerating its IQ at the moment.

The reasons for delays in implementing price increases are two-fold: 1) the lag time I’ve repeatedly underscored for tariffed products to get to the shelves (because companies don’t want to raise prices, much less brag about it, before they have to); and 2) waiting (on their own dime) to make sure the TACO tariffs are going to stabilize at a certain rate before they have to raise prices because they could manage without a price increase for a couple of months if it looked like Trump was going to chicken all the way out.

Of course, the reason, I’ve underscored the lag time repeatedly, is that I was certain the Trump administration would try to claim tariffs were not causing price increases when prices did not rise in the same month tariffs went into effect.

Powell said last month that companies up and down the supply chain would seek to avoid paying tariffs, but that ultimately some combination of businesses and consumers would bear the cost.

Of course.

“There’s the manufacturer, the exporter, the importer, the retailer, and the consumer, and each one of those is going to be trying not to be the one to pay for the tariff,” the Fed chair said. “But together, they will all pay for it together—or maybe one party will pay it all. But that process is very hard to predict, and we haven’t been through a situation like this.”

And all that really means is that, to the extent companies chicken out from handing the cost increase to consumers because that would risk some loss of market share to their competitors, those companies become less profitable; so, the stock market ultimately has some serious tariff reckoning to do in that case, too, which would mean shareholders pay for the tariffs. Companies have less cash to disperse via dividends and share buybacks if they don’t pass the tariff along to consumers.

'While inflation has remained relatively tame in the face of chaotic global trade policy, investors may start to heed the Fed's concerns about a tariff-fueled rise in inflation, reigniting a concern many were hoping wouldn't come to fruition,' Kenwell added….

He said Wall Street is starting to 'ask whether today's reading is just a one-off blip or the start of something bigger.'

That’s how dumb they are. A blip! Grab a clue, Guys. The tariffs are real. They’re big, and they're coming, and so are the price increases that go with them. It’s math! Get real.

The Fed chair has said that the duties could both push up prices and slow the economy, a tricky combination for the central bank since higher costs would typically lead the Fed to hike rates while a weaker economy often spurs it to reduce them.

And that is the trap I said we’d find the Fed in, assuring us of stagflation where prices go up due to tariffs and the shortages that they cause, having nothing to do with Fed money printing—though going back to money printing would pour gasoline all over that inflation if they make that mistake. At the same time, the economy seeps away due to consumers buying less and less as they spend more and more to do it. And you will see, as we already have, that American manufacturers raise their prices, too, because the tariffs on their competitors give them headroom to both inflate prices and still remain lower than their international competitors in order to capture their market share.

While it will take awhile for July’s numbers get reported in August, I said YOU would start to feel the inflation in the early summer … like this:

“It feels like a miracle if I’m able to leave the grocery store without spending $100,” the Edison, N.J. resident said. “We’re trying to save for a house, we’re trying to save for a family, so prices are really on our mind.”

'Today's CPI report was mostly in-line with expectations,' Bret Kenwell, a US Investment Analyst at eToro, told DailyMail.com.

'The only problem is that those expectations had called for a rise in inflation, with year-over-year inflation hitting its highest level since February.'

So far, the markets have largely shrugged at higher pricing.

Not today, they didn’t.

Many of the higher tariffs don’t begin until August. Trump may even TACO out on some of them again; but eventually, he’ll get all his tariffs in place, raising them from time to time when he decides he doesn’t like somebody (as he just did with Brazil over choosing a leader he doesn’t like; that’ll teach ‘em when they have to watch us pay more for their products). As the tariffs are formalized in August and beyond, they will have the same lag in making their journey onto store shelves. So, expect the inflation to be a long, drawn-out process.

But the worst part …

Coffee drinkers had saw [sic] the largest yearly increase. Prices for a cup of joe jumped 2.2 percent.

Now, that is where you will get America’s attention … when all that imported coffee starts to soar! When it pours, it soars. The nation got started with a revolt over tariffs on tea. Wait till you see what it does with tariffs on coffee!

Housekeeping

A couple of non-related points in today’s headlines that follow. One of them confirms something I wrote a day ago:

One story says that Putin sees Trump’s 50-day warning as an open window to attack Ukraine as much as he possibly can for fifty days! Did Trump see that coming and secretly promise in that phone call to give his ol’ pal this wide-open window to finish up his war and get as much as he can, or was Trump just that blind that he had no idea putting a deadline on it would effectively say, “Do what you want until then?” Anyway, Russian insiders are seeing it as a wide-open window to attack Ukraine with all they have. So, that’s now confirmed.

The other shows how slimy DC is as Republicans, again, all team up behind their man Trump to vote AGAINST the public release of the Epstein files, something the Dems began pushing for. Only ONE Republican voted to release the info.

Donald Trump’s attorney general, Pam Bondi, teased a full accounting of the Epstein evidence, including a purported client list earlier this year. But 10 days ago, she changed course when she announced that the Trump administration had reviewed the evidence, concluded that Epstein had indeed killed himself in jail, and decided not to release the contents that the justice department said included a thousand hours of video depicting child sexual abuse….

Democrats had weighed in on the issue, hoping to force a release of the documents. “The question with Epstein is: Whose side are you on?” California Democratic US House member Ro Khanna, the author of the Epstein measure, told Axios. “Are you on the side of the rich and powerful, or are you on the side of the people?”

Well, Trump has made it unmistakably clear whose side he’s on: his own! Which would also be the side of all his rich-and-famous buddies.

Why not release the Epstein Files and just redact the names and images of the 1,000+ girls who were involved in statutory rape? No one wants to seem the hurt. Blondi says Team Trump wants to protect the victims. Fine. We all do. So, protect them. Just release the names and pics of their Johns (with the inappropriate parts of their bodies redacted). We’ll see what they look like with little black rectangles over certain parts of their bodies while they cavorted with teen-age girls. Maybe we’ll even see Trump with a little black rectangle. Or just skip the photo section and release the names, allegations, witness statements, etc. Release it all as public info in trial cases. Lots of trial cases.

But, no, all Republicans but two (one voted against and one abstained as all should have done from sex when they were cavorting on Epstein Island) voted against letting America know what was happening on Epstein Island and at his mansion next door to Mar-a-Lago. Let’s see who the real Reptilians are that dined at Hillary and Epstein’s Florida paedo pizzaria. Must be a lot of Republican reptiles—as in snakes—since they are the ones now carefully guarding the list of those who called in reservations to sexually dine on mere babies at the Hillary Hut Pizzaria. And to think we were sure it was mostly just friends of the Clintons who made the Epstein guest lists!

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