Did the Council of Economic Advisers (CEA) just claim tariffs aren’t inflationary?
In this post I break down their July 2025 report, what they got right and what they left out. The spin is strong, the data tells a more complicated story.
‘Imported Goods Have Been Getting Cheaper?’ Let’s Talk About the CEA’s July Spin Job.
The Council of Economic Advisers (CEA) recently released a report titled ‘Imported Goods Have Been Getting Cheaper Relative to Domestically Produced Goods’ (July 2025).
Let’s be clear: this reads more like a political defense memo than serious economic analysis.
The Two Big Claims the Report Makes:
Imported goods prices are falling.
Tariffs are not inflationary.
What They Did (and Didn’t) Do:
The analysis relies on incomplete and misaligned data.
It ignores timing and transmission delays.
It leans on averages that hide trend shifts.
Leading too…
Seasonally adjusted methods in a non-seasonal environment distort reality.
Tariff impacts are just beginning to flow through the system.
And $100B in tariff collections are not even captured in the import price data.
They compared BEA PCE data (seasonally adjusted) with BLS import data (not seasonally adjusted). So they had to…
Decomposed (slice and dice to fit their answer) the PCE Price Index into import and domestic components using BEA input-output tables and BLS import price data.
They used seasonal adjustments in a setting where they are likely invalid. Tariffs are a new, non-cyclical force not a seasonal pattern. Using seasonally adjusted data masks the abnormal impact tariffs may have on prices. That’s a big methodological red flag.
Their analysis didn’t include actual tariff collection of $100B+ in government revenue that doesn’t show up in BLS import price indexes but may be slowly trickling into consumer prices. This estimated $100 billion was paid by US importers and consumers.
Looking deeper at the source data tells a very different Story.
December 2024 to February: Deflation happened before Tariffs.
Most of the decline in import prices happened before March before tariffs were even announced.
Petroleum prices fell sharply in Jan/Feb.
Food & Beverage imports also declined modestly.
These early drops pull the average down, making it look like sustained import price deflation.
March–May: The Tariff Period.
This is the critical test period.
My analysis of the underlying data shows:
BLS All Commodities Index fell just 0.21% (Mar–May). But that all happened in March! April saw an increase in price. May is flat.
Core import prices rose 0.62% or 2.48% annualized. Excluding fuel, import prices are raising.
PCE Core Goods and Food & Beverage prices continued rising.
Yet the CEA lumps this in with earlier months and says, ‘See? No import price inflation.’
That. Is. Spin. If anything, the March 2025 to May 2025 period is where import price starts to tick up.
Import price and tariff impact to business and consumers lag time is real. When tariffs do take effect:
Importers often absorb initial costs.
Retail price hikes may be delayed or spread over multiple quarters.
PCE price data reflects retail level pricing, does not break out imports, and excludes current tariff collections.
So… concluding ‘no import price inflation’ by May is like judging a movie from the first 15 minutes.
Why This Matters
The administration is using this report to claim tariffs aren’t inflationary.
I say this…
‘Sound economic policy/reporting requires transparency, not cherry picked time periods and misleading conclusions.’
Yes, so far import prices have risen more slowly than domestic prices. But that’s not the full story.
Seasonally adjusted methods in a non-seasonal environment distort reality.
Tariff impacts are just beginning to flow through the system.
And $100B in current tariff collections aren’t even captured in the import price data.
As I continue tracking inflation, the impact of tariffs, and imported goods pricing, keep an eye out for tomorrow’s Consumer Price Index (CPI) release. I will be watching for signs of how recent policy may be filtering into inflation rates. I will issue a full report once the numbers are out.
Cutting Through the Spin.
At Econ Without the Ego, I break it down, follow the money, and look past the politics so you can see what’s real. Join me on Substack. I’ll keep you in the loop.
George.