Increased tariffs going to flow through supply chain and inflation data, says Bleakley's Boockvar

Key Concepts:

• Tariffs and Inflation
• Pricing Power
• Supply Chain Impact
• Import Prices
• Commodity Prices (Copper, Silver, Platinum)
• CRB Raw Industrials Index
• Global Demand for Industrial Metals
• Multi-polar World

1. Tariffs and Inflation Concerns:

• Austan Goolsbee's concerns about tariffs leading to inflation are central.
• The discussion focuses on whether the "beast" of inflation has been quelled.
• Peter Boockvar argues that inflation is present due to tariffs; the key question is who absorbs the cost.

2. Import Prices as an Early Indicator:

• Import prices are highlighted as the "first touch" of tariffs.
• In April, import prices (excluding food and energy) rose 0.5% month-over-month, followed by another 0.4% increase in May.
• Boockvar is specifically watching import prices as a leading indicator of tariff impact.

3. Pricing Power and Margin Impact:

• Companies with pricing power can pass tariff costs onto consumers.
• Companies lacking pricing power must absorb costs, leading to profit margin cuts.
• Examples:
  • Helen of Troy: Plans to raise consumer prices by 7-10% this summer.
  • ConAgra: Faces a 7% cost increase due to commodity, labor, steel, and aluminum inflation.
  • Levi's: Can mitigate most tariff impact, planning only a 2-3% increase on select items.

4. Winners and Losers in the Tariff Environment:

• The ability to absorb or pass on tariff costs separates winners from losers.
• Levi's ability to absorb costs implies someone else in their supply chain is bearing the burden.
• The impact is not uniform; it depends on a company's position and leverage within the supply chain.

5. Commodity Price Increases:

• The CRB Raw Industrials Index reached its highest level since January 2023, matching levels from March of the same year.
• Significant price increases in various metals:
  • Silver: Highest level since 2011.
  • Platinum: Up about 30% over the past couple of months.
• The rise in industrial metal prices is attributed to:
  • Companies securing metals ahead of potential tariffs.
  • The importance of critical minerals in a multi-polar world.

6. Global Demand vs. Tariff-Driven Price Increases:

• While increased demand could explain rising prices, the primary driver appears to be tariff-related stockpiling.
• Regardless of the cause (demand or tariffs), higher prices will flow through the supply chain and impact inflation.

7. Supply Chain Dynamics:

• The discussion emphasizes the interconnectedness of the supply chain.
• If a company like Levi's can absorb costs, it means another entity in their supply chain is bearing the burden.
• Tariffs create a ripple effect, impacting various players along the supply chain.

8. Conclusion:

• Tariffs are contributing to inflation, and the impact varies depending on a company's pricing power and position in the supply chain.
• Rising commodity prices, driven by both demand and tariff anticipation, will further exacerbate inflationary pressures.
• The key question is whether companies can pass these costs onto consumers or if they will need to absorb them, impacting profit margins.