UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'Up and down the supply chain'
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Aug 15, 2025 The discussion dives into the intricacies of US producer price inflation and its unexpected higher numbers. It highlights how trade taxes ripple down through increasingly complex supply chains over time. Interestingly, rising producer prices don’t always translate to squeezed consumer profits, as many goods on shelves were produced before tariffs came into play. The economic interplay between the US and China also provides critical context for understanding these market dynamics.
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Tariffs Travel Slowly Through Supply Chains
- Trade taxes move slowly through modern complex supply chains and their effects take months to show fully.
- Producer price rises can reflect tariffed inputs long before consumer prices change.
Producer Prices Don’t Equal Squeezed Profits
- Rising producer prices without higher consumer prices don't necessarily mean squeezed profits.
- It often means current factory goods use tariffed inputs while store inventory still reflects pre-tariff production.
Watch These Data To Gauge Tariff Impact
- Watch retail sales and import price inflation for early signs of consumer impact from tariffs.
- Check ex-oil import prices to detect whether exporters are discounting to offset tariffs.