To The Moon

As of April 17, 2025, concerns about "tarifflation" and "Trumpflation" dominate economic headlines, with predictions of steep price hikes for consumer goods due to the Trump administration's sweeping tariffs—145% on $541 billion of Chinese imports, 10% on non-Chinese imports, and 20–100% on select countries.

Despite these fears, retail prices have largely held steady: iPhones still start at $799, shirts average $50, and PlayStation 5s remain $499. This price stability—alongside declining inflation (Truflation at 1.4%), plunging consumer sentiment (University of Michigan Sentiment Survey at 50.8, near record lows), and sluggish retail sales growth (1.8% YoY)—suggests Trump's economic agenda may be mitigating the risks of a consumer-led recession and deflation, rather than triggering hyperinflation. Here's how.

Truflation.com (blockchain-based data based on a large basket of real-time consumer goods) shows inflation rates falling rapidly.

No Price Hikes: A Telling Sign

Despite projections of 26–79% price hikes (e.g., iPhone 16 Pro Max reaching $2,300, shirts rising to $68.50), broad retail prices haven't moved. This is largely due to the April 12 exemptions on $390 billion in electronics, including $41 billion in smartphones, capping tariffs on these goods at 10–20%.

Retailers also benefit from 3–4 months of inventory buffers, with weak demand slowing turnover and price pass-through.

Supply chains have largely normalized, with shipping costs significantly reduced from their 2021 highs, easing previous logistical constraints. Oil prices have fluctuated but remain relatively stable, with Brent crude recently at $66.40 per barrel and WTI at $63.13, influenced by U.S. sanctions on Iran and OPEC production cuts.

Inflation indicators show moderation: the Consumer Price Index (CPI) rose 2.8% year-over-year in February 2025, down from 3.0% in January and well below the 9.1% peak in 2022. As a result, earlier warnings of  "tarifflation" —which projected CPI at 4–5%—now appear overstated.

Mitigating Recession and Deflation Risks

Economic signals, which had already shown signs of weakness for many quarters, have grown worrisome. The University of Michigan's Consumer Sentiment Index plunged to 50.8 in April, marking the second-lowest level since 1972.

Combined with weak retail sales (1.8%) and flat or falling prices on goods (electronics down 1–2% YoY), the risks of a consumer-led recession or outright deflation have risen:

Recession probability: ~50%, with a potential GDP decline of 1–2% ($270–$540 billion)

Deflation risk: 30–40%, particularly if Truflation dips below 1%

Possible job losses: 200,000–500,000

Household income hit: $2,000–$5,000 annually

Global GDP contraction: 0.3–0.5%, alongside weaker trade and markets

Trump's economic policies may be cushioning these shocks:

Tariffs: Stabilize prices on goods like smartphones ($45–$200 increase range) and apparel ($5–$20), nudging Truflation toward 2–3% and cutting deflation odds to 10–20%

Reshoring incentives: Apple now produces 20% of iPhones in India, creating 50,000–100,000 jobs

Reduced Illegal Immigration: Estimated 1–2 million fewer undocumented immigrants (down from 11 million) push low-skill wages up 2–5%, translating to $20–$50 billion in wage gains and a 0.1–0.2% GDP boost via consumer spending. Public service savings (healthcare, safety) of $3–$6 billion also free up budgetary space

Deregulation and Tax Cuts: Corporate tax cuts to 15% and relaxed regulations spur AI/robotics sector growth (20% YoY), pushing the U.S. AI market above $100 billion. Productivity gains of 0.5–1% (worth $135–$270 billion) are helping offset low-skill displacement, with a net gain of 100,000–200,000 jobs

Economic and Global Benefits

These combined policies foster organic economic growth:

U.S. GDP: Grows 0.8–1.5% ($216–$405 billion), raising quarterly growth from 1.5% to 2.3–3%

Unemployment: Falls from 4.1% to 3.8–4%

Retail sales: Improve from 1.8% to 2.5–3%

Wages: Increase $70–$150 billion, driving $74–$147 billion in added consumer spending

Global ripple effects are also significant:

Global GDP growth: Boosted by 0.3–0.5%, reaching 3.3–3.5%

Trade: Strengthens with China ($541B) and NAFTA partners ($1.7T combined)

Markets: Benefit as the MSCI World Index rises around 5%

Risks and Outlook

However, risks loom. If tariff exemptions expire post-September 2025, prices could spike 10–30%, adding $1,000–$3,000 to household costs. If wage growth fails to keep pace, demand may falter.

Retaliatory trade actions (e.g., rare earth export bans from China) also threaten supply chains and tech production. Still, low consumer sentiment and stockpiled inventories give the administration a 4–5 month negotiation window to extend or expand exemptions.

While the current  "tarifflation" narrative has 20–30% credibility, it may rise to 50% by Q4 2025 if exemptions lapse. Yet inflation remains well below 2022 levels (when CPI peaked at over 9%), and key Trump policies—tariffs, immigration reform, and AI invest

ment—appear to be fostering resilience and organic growth that could outperform pre-Trump trends.

Bottom line: Watch retail prices and consumer data after July. So far, the inflation shock hasn't materialized—and deflation might be the bigger concern.

@Tiger_comments