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US: Inflation Comes Down to Supply and Demand
We have been on inflation watch all year, bracing for the Administration’s new tariff policies to create a classic negative aggregate supply shock on the economy. A supply shock occurs when production costs, or availability of goods, suddenly change, shifting the aggregate supply curve. When tariffs are imposed, imported inputs and goods become more expensive, and firms relying on those imports face higher costs and produce less at any given price, i.e., the aggregate supply curve shifts to the left. Domestic producers of the tariffed goods may also increase their prices as they no longer have to compete against ... (full story)
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