The price of a dozen large white eggs was $2.14 last year. The figure has risen to $3.65 in November, according to the Bureau of Labor Statistics. The increase is 70%. The reason is a shortage. Low supply causes shortages. The egg prices are driven by bird flu and the death of hundreds of thousands of birds. A new broader wave of inflation could be caused by tariffs. The relationship between eggs and wide inflation is closer than one might think.
According to The Washington Post, avian flu killed 40 million egg-laying chickens last year. Tariffs could now knock out or lower the supply of a range of goods and services that runs from energy to cars. A series of shortages drove the consumer price index up 9.1% year over year in June 2022. Eggs were on that list, along with meat, poultry, and fish. The food group rose 11.7% year over year. The egg shortage started in January 2022.
Tariffs could cause a series of shortages not unlike the chicken problem. The CPI gas price index rose 59.9% in June 2022. Supply was tight because of the Russian invasion of Ukraine. If the Trump administration puts 25% tariffs on Canada, oil prices would rocket higher again. Canada is the largest supplier of heavy crude to the United States. Fuel oil prices and gas prices in the United States would cripple driving and home heating.
Canada also exports cars to the United States. In June 2022, the price of new cars rose 11.4%. The increase had been much higher earlier in the year and 2021 because of supply chain challenges caused by the COVID-19 pandemic. There could be tariffs on cars imported from Mexico.
Other large imports from Mexico include consumer electronics, beer, plastics, and gems.
The effect of mid-2022 inflation in the United States was a deep anxiety about a recession. The Federal Reserve helped lower the potential of that disaster with rate cuts. Until recently, most experts believed that the Fed would continue cutting. However, there is modest evidence of inflation, particularly driven by a healthy job market. What happens to the anticipated cuts next year? If tariffs come, the Fed faces a new set of challenges.
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