Tariffs are feeding inflationary risk

Tariffs are back in the inflation story because the new ones are broader, stranger, and landing in places that feed directly into everyday costs. In late February, after the Supreme Court knocked out an earlier tariff structure, the White House shifted to Section 122 of the Trade Act and imposed a temporary 10 percent global import surcharge that took effect on February 24, 2026. At the same time, the administration kept widening its use of Section 232, the national-security tariff law that had once been aimed mainly at metals. In January it slapped a new 25 percent Section 232 tariff on semiconductors, chipmaking equipment, and some derivative products from all countries. That is not a narrow trade spat. It is a tax on inputs that show up everywhere. That matters because inflation does not need a dramatic shock to turn upward. It just needs enough new friction in enough supply chains. The IMF said last week that tariff-driven goods inflation had already offset cooling in services prices, leaving overall inflation flat in 2025 rather than falling faster. It also said near-term inflation risks now lean upward. The old hope was that tariff pass-through would fade. The new problem is that Washington keeps adding fresh pass-through. The Section 232 shift is part of why this feels different. These tariffs are no longer confined to a few politically symbolic products. The January semiconductor proclamation created an immediate 25 percent tariff on certain advanced chips and related goods, with a second phase still hanging in the air after trade talks conclude. The administration also used the same national-security framework to push on critical minerals. Even where tariffs are not yet active, the threat is enough to change sourcing, contracts, and pricing. Companies do not wait for the final legal text if they think the next shipment will cost more. Then came pharmaceuticals. On April 2, the administration ordered tariffs of up to 100 percent on some imported brand-name drugs, with lower rates for companies that agree to shift production to the United States and possibly lower prices. The policy is pitched as a blow against high drug prices, but tariffs do not make imported medicines cheaper. They raise the landed cost first and leave everyone else to argue over who eats it. Drugmakers can absorb some of that. Pharmacy benefit managers can squeeze some of it. Patients and health plans often get the rest. That is where the inflation story spills into insurance and small business balance sheets. When tariffs raise the cost of auto parts, electronics, machinery, or construction materials, claims get more expensive to settle. Repair bills rise. Rebuild costs rise. Replacement values rise. Insurers then face higher claims severity, which tends to show up later in premiums. Small firms get hit from the other side. They pay more for inventory and equipment now, then face softer demand if they try to pass the increase on. The NFIB’s latest small-business data still show owners uneasy about expansion even before this latest round of tariff layering is fully reflected. Corporate earnings are already showing the mechanism in real time. Nike’s fiscal third-quarter report did not just mention tariffs in passing. The company said the new 10 percent global baseline tariffs created a 300-basis-point drag on gross margin, with nearly 650 basis points of pressure in North America. Revenue was flat at $11.3 billion. Net income fell 35 percent to $520 million. The company beat earnings expectations anyway, then cut guidance because goods already moving through the supply chain had become more expensive before they ever reached a shelf. That is inflation in its most practical form: not a theory, not a forecast, just a box arriving at the port with a higher bill attached.