Wall Street: The Worst of Trade War Inflation Is Yet to Come

While markets breathed a sigh of relief after the latest U.S. CPI data came in cooler than expected, top Wall Street analysts are cautioning investors that the full impact of trade wars hasn't yet appeared in the numbers, with new price surges likely in coming months.

BLS' latest report showed U.S. inflation unexpectedly moderated in April, with the CPI rising 0.2% month-over-month and 2.3% year-over-year, both below consensus estimates of 0.3% and 2.4%, respectively.

However, Wall Street warns consumers that they may face another inflationary wave soon. The data collection process inherently lags real-time developments, and businesses aggressively stockpiled inventory in Q1 to avoid tariff-related costs, preventing the supply shortages that typically drive prices higher.

Morgan Stanley noted a nearly 30% surge in front-run imports of consumer goods last quarter. "This number doesn't matter because tariff effects will start showing up as soon as next month's data," said Ellen Zentner, the firm's Chief Economist for Wealth Management.

BlackRock's Global CIO of Fixed Income, Rick Rieder, similarly believes tariff impacts will "ramp up" during the summer months. While current data shows little tariff effect beyond modest auto price increases, he warned of coming pressures in a Tuesday note.

Janus Henderson's Head of US Securitized Products, John Kerschner, anticipates tariff-induced inflation may emerge starting in June. "Markets will be watching this data closely to confirm the actual magnitude of tariff-driven price increases," he wrote.

Wharton School finance professor Jeremy Siegel likewise predicts price jumps in coming months, and everyone probably won't see tariff effects until June or July because very few impacted goods have yet moved through retail channels into government sampling.

Bank of America analysts noted possible early tariff signals in accelerated price increases for heavily imported goods like household items, pharmaceuticals, IT products, and toys, but expect clearer evidence in subsequent reports.

Goldman Sachs projects the Fed's preferred core PCE inflation gauge could rise from 2.6% in March to 3.6% by year-end. Goldman Sachs suggests their forecast reflects sharp price increases across most core goods categories, with consumer electronics, autos, and apparel seeing the fastest tariff-driven gain.