It has been five months since the latest round of tariff hikes on Chinese goods went into effect and there are still no significant indications that U.S. consumers are paying higher prices for goods.

Prices received by U.S. businesses rose by a higher than expected o.5 percent in January, according to data released by the Labor Department Wednesday. Economists had forecast prices to rise just one-tenth of a percentage point higher.

Despite the hotter than expected headline figure, Wednesday’s Producer Price Index is unlikely to give rise to worries about inflation. Pricing data has indicated very soft numbers in recent months so January’s jump is a bit of catch-up. Compared with a year ago, the index is up just 2.1 percent.

The Producer Price Index, or PPI, is a gauge of inflation based on prices received by U.S. businesses. It typically closely tracks the more familiar Consumer Price Index, which is based on prices paid by consumers. Both have indicated very low inflationary pressures in recent months, surprising economists who expected low employment, rising wages, and tariffs to raise prices. Importantly, the prices for goods rose more slowly than services.

Prices for final demand goods–those sold to consumers–rose by one-tenth of a percentage point in January. The index for final demand less the volatile categories of foods and energy rose 0.3 percent. Compared with a year ago, goods prices were up 1.8 percent. Excluding foods and energy, good prices are up 0.7 percent.

Interestingly, the big January jump in prices seems unrelated to the tariffs since it comes several months after tariffs were hiked on some Chinese goods. What’s more, during the month the U.S. agreed not to raise tariffs further and even cut some tariffs in half.

“A 13.9-percent rise for prices of iron and steel scrap was a major factor in the January advance in the index for final demand goods. Prices for fresh and dry vegetables; jet fuel; search, detection, navigation, and guidance systems and equipment; and grains also moved higher,” the Labor Department said. “Conversely, the gasoline index decreased 1.5 percent. Prices for chicken eggs, diesel fuel, and motor vehicles also declined.”

A closer look into the PPI data once again suggests that consumers are not being squeezed by tariffs on imports from China and imported steel and aluminum.

Tariffs are Taxes, Who Pays is Complicated

So who is paying for the tariffs? We know the U.S. government has collected tens of billions of dollars in import duties since the Trump administration began tightening trade policy, so it is clear that someone is footing the bill. But the pricing data do not support the often-repeated mantra that “tariffs are taxes on consumers.”

Tariffs are taxes, to be sure. But unlike a sales tax or a gas tax, consumers do not directly pay any tariffs. Tariffs are paid by importers, often large U.S. companies that are importing from their own foreign subsidiaries or foreign contractors. But businesses cannot raise their prices just because their costs or taxes go up. Sometimes they have to absorb the costs.

We have seen this recently with wages, which have been rising faster than inflation, which means labor costs are rising faster than prices. Similarly, the massive cut in corporate taxes enacted at the end of 2017 did not automatically translate into businesses slashing prices because their tax costs had fallen.

In addition, there is anecdotal evidence that Chinese manufacturers are slashing prices in an attempt to hold on to market share in the U.S.

“We have put 25 percent on $250 billion of Chinese goods coming into our country, including $50 billion of high technology equipment. You haven’t seen any, or virtually any, price increase,” President Trump said last summer. “Because what China does is they subsidize their companies because they want to keep people working and they want to stay competitive.”

No Inflation Despite Tariffs

Durable goods, products purchased by consumers and businesses that are expected to last three years or more, are a good place to look for signs of metals tariff-led inflation. The producer-price data shows that prices of raw materials used in durable goods rose a seasonally adjusted 0.2 percent in January, after falling in eight of the previous nine months. Compared with a year ago, prices are down a staggering 6 percent.

Components for durable goods, the prices of parts that go into durables, were flat in January and are up just 0.4 percent compared with a year ago. “Final demand” consumer durable good prices–those that get reflected on store shelves–fell 0.2 percent. These prices are up just four-tenths of a percentage point compared with a year ago.

The nondurable manufactured goods category is where we might see signs of the China tariffs. Materials prices here rose 0.9 percent, after falling 0.5 percent in December and 0.9 percent in November. Back in October, materials for non-durables jumped 1.8 percent. It is possible that some of this volatility was caused by manufacturers reacting to the uncertainty that surrounded the phase one trade deal in the last four months of 2019 and the start of 2020.

But note that even this volatility has not really sent prices higher. Compared with a year ago, materials prices are d0wn five percent. Components prices fell two-tenths of a percentage point in January are down four-tenths of a percentage point from a year ago. The final demand category shows prices up just 0.1 percent in January and up 1.9 percent compared with a year ago.

So the picture drawn by these broad categories is one of low in both durable and nondurable goods, extremely strong deflationary pressures further up in the supply chain, and no sign of tariff pressure at all.

Metals Tariffs Haven’t Raised Prices on Planes, Trains, or Automobiles

What about specific items? Still no signs of tariff price pressure. Start with products that were predicted to rise in price because of the metals tariffs. Specifically, cars and trucks.

“U.S. President Donald Trump’s steel and aluminum tariffs will boost car prices by hiking commodity costs for manufacturers, automakers have warned,” Reuters reported last year.

That has not happened. Car prices fell by one percent in January. They are down 0.9 percent from a year ago. Prices of light trucks–which include all those SUVs that so many American families love–fell 0.2 percent. They are down 0.7 percent from a year ago. That’s not great news for automakers but it certainly means they were wrong when they predicted tariffs would put up prices.

Car and truck parts? These rose 0.1 percent in January and are down 0.2 percent from a year ago.

Seeing a pattern yet? Let’s look at some heavy-duty steel and aluminum products. Aircraft prices were up 0.1 percent in January and are up 1.1 percent from a year ago, continuing the deceleration from steeper year-over-year gains seen this summer.

Perhaps the prices of aircraft have been held down by the trouble with Boeing planes. So let’s look at the prices of ships in January: up 0.2 percent for the month and 2.4 percent annually. Railroad equipment prices rose 0.2 percent and are up 1.1 percent from a year ago.

Prices for Consumer Goods Are Not Rising Due to China Tariffs

Household appliances had been pushed up by a big jump in the price of washing machines following a specific tariff intended to counteract anti-competitive dumping that had depressed prices. But this has begun to unwind. On a monthly basis, household appliance prices fell every month from June through September and then were flat through the end of the year. In January, appliance prices fell 1.2 percent. For the year they are down 0.4 percent.

Furniture is one of the biggest categories of consumer items that were hit by the China tariffs. Household furniture prices rose 0.4 percent for the month, the fourth consecutive monthly gain and which could reflect the September 1 round of tariffs. But compared with a year ago they are up just 2.2 percent.

Soaps and detergents imported from China saw their tariffs rise from 10 percent to 25 percent but prices fell 0.1 percent in January and are up just 1 percent compared with a year ago.

A lot of categories of home electronic equipment were hit with the higher China tariffs. Prices here jumped 0.6 percent in January after being flat for the previous three months following the September tariff hike. Compared with a year ago, prices are up 2.7 percent.

Computer prices fell 1.9 percent in January and are down 4.9 percent compared with a year ago.

The Tariff Hoax Debunked

One of the reasons so many economists and journalists claimed, without evidence, that the Trump administration’s tariffs would be passed on to consumers is that they assumed the purpose of tariffs was to raise domestic prices to boost the bottom lines of domestic manufacturers.

But that was not the goal of the China tariffs at all. The tariffs were aimed at pressuring China to abandon its unfair and illegal trade practices. Metals tariffs did aim to boost the bottom line of U.S. steel and aluminum producers but this can be accomplished by squeezing margins of producers of intermediate products–margins that had been inflated by metals made artificially cheap by China dumping on the global market–without harming consumers.

U.S. businesses appeared to have mostly absorbed the tariffs, which put pressure on profit margins. But as businesses have adjusted to the tariffs, that pressure is now coming off.