First full month after presidential transition expected to indicate signs of likely foreign trade disruption
Wholesale prices in the U.S. are closely watched amid President Donald Trump’s tariff wars on friends and foes including Canada, Mexico and China. February’s Producer Price Index report, due on March 13, could indicate the beginning of the price turmoil, considering it was the first full month since the presidential transition from Joe Biden’s White House.
Although kept suspended until April 2, the higher 25% tariffs that the Trump administration has imposed on vital imports from Canada and Mexico have been roiling the markets. Most recently, a seemingly impulsive proposal to double the tariffs on Canadian imports and their hasty withdrawal have not helped matters as the markets have sunken into a sea of red.
Sponsored
The PPI for February is expected to show an uptick along with the CPI as the uncertainty had set in with Trump statements from the January 20 inauguration. It is expected to show a larger increase than 0.4% uptick in January 2025 as reported by BLS on February 13. The agency report said the final demand prices rose 0.5% in December and 0.2% in November 2024.
In February, the final demand prices in goods at 0.6% led the broad-based increase while final demand prices in services moved up by 0.3%. The report showed that the index for final demand less foods, energy, and trade services rose 0.3% in January following 0.4% jump in December.
Spurt in final demand services
The report attributed nearly one-third of the January rise in the index for final demand services to prices for traveler accommodation services, which advanced 5.7 percent. The market will be closely watching the indexes for automobile retailing (partial); truck transportation of freight; food and alcohol retailing, which have serious transborder trade implications.
About half of the broad-based 0.6% January advance of index for final demand goods, marking the fourth consecutive rise, was attributable to a 1.7-percent increase in prices for final demand energy. The indexes for final demand foods and for final demand goods less foods and energy also rose, 1.1 percent and 0.1 percent, respectively.
Of particular interest for the market now would be the contribution that 10.4% increase in the index for diesel fuel to the overall price rise in January. The U.S. energy security is under serious strain as Canada is a major source of oil and gas, at least for the northern states. The indexes for chicken eggs, beef and veal, gas fuels, jet fuel, and communication and related equipment also moved higher in January. The February report could show a worsening of the situation for these products for which the U.S. heavily depends on imports from Canada and Mexico.
Timeline of trade tensions
The trade tensions between Washington on the one hand and Ottawa and Mexico City on the other started getting worse after then President-elect Trump announced plans to impose 25% tariffs on key imports from the northern and southern neighbors citing trade deficit, national security and illegal immigration concerns.
The Trump administration outlined the "America First Trade Policies" on the January 20 inauguration day, directing various trade priorities and studies to be completed by April 1, 2025. The tensions peaked on February 1 when the White House formally announced 25% tariff on key Canadian goods like steel and aluminum, effective February 4. Some energy products were subject to 10% tariff. On the same day, Canada responded with retaliatory tariffs of 25% on a broad range of U.S. goods, also set to take effect on February 4, 2025. However, both countries paused the implementation of these tariffs for 30 days, extending the deadline to March 4, 2025, to allow for further negotiations. Later, Trump pushed the deadline to April 2, 2025.
Sponsored
