Happy Monday, and welcome to our editorial on everything macro! This is the place where we challenge the consensus narrative to uncover the best risk/reward trades and views in the world of macro.

The tariffs, despite all the bizarre flip-flopping, are going live to some extent this month. We know that China has been hit with two rounds of 10%-point tariffs, while Mexico and Canada are facing 25% tariffs (with numerous exemptions). Steel and aluminum are also subject to a 25% tariff as of this week. On the surface, it all sounds like inflation will ramp up significantly in March—but just how bad is it? And what is the expected pass-through from import tariffs to end-consumer prices?

In a worst-case scenario where all tariffs are fully passed on to the importer (i.e., exporters do not absorb tariffs via lower margins to protect market share), we could see an average import price jump of 5.5% in the U.S. this March. Based on historical correlations, this would translate to roughly a 0.75% increase in consumer prices (since about 15% of import price changes tend to pass through to consumers).

However, this assumes exporters make no effort to absorb the cost, which would expose them to rising local competition within the tariff zone—ultimately, Trump’s goal. More reasonable scenarios suggest import price increases of 1.5–3% on the month, implying an impact of roughly 0.21–0.40% on consumer prices. While less alarming, it’s still a notable shift.

But beyond all these hypothetical calculations, the most intriguing real-time observation is that prices are NOT rising across the economy—if anything, they may even be fading. This is completely unexpected. So, how on earth can that be?

Chart of the Week: How big of an import price-jump will we face in March?