Inflation continues to fall

[+ Vegas_Millennial]

On 5/7/2025 at 11:17 PM, mike carey said:

You're right about that, big diverse countries produce most of the food that they need, importing niche products or things they can't produce at a competitive price. Vanilla beans are one example, production is very labour intensive and even at a high price, countries like the US (and Australia) can't produce it at scale. Both of us could, in our tropical areas, but demand would be for high-end products that want the cachet of having domestically-produced vanilla. A tariff on the rest of the supply from Madagascar would have near zero effect on overall inflation.

One US import that may surprise is Australian beef, which from what I understand is mainly grass-fed beef that is used in hamburger meat to complement the grain-fed US beef. The current 10% tariff is likely to have a negligible effect (assuming that it's still imported) as it's a small impost on the cost of getting a burger out of the door at McDonalds.

Yes!  And, high tariffs are not across the board.  As reciprocal, only on countries who have tariffs or value added taxes against the U.S. by at least as much.  A small country producing vanilla beans isn't subject to a U.S. tarrif increase above 10% if it's not already taxing U.S. exports by at least the same amount.

Edited May 14 by Vegas_Millennial
Edited to reflect that tariffs of 10% exist that are not reciprocal, but may be in response to Value Added Taxes

[mike carey]

4 minutes ago, Vegas_Millennial said:

Yes!  And, the tariffs are not across the board.  They are reciprocal, only on countries who have tariffs against the U.S. by at least as much.  A small country producing vanilla beans isn't subject to a U.S. tarrif increase of it's not already taxing U.S. exports by at least the same amount.

Not true, the US has applied 10% tariffs as a baseline regardless of what applies to US exports. Australia has effectively no tariffs on US exports but we have 10% on our exports to the US.

[+ Vegas_Millennial]

1 hour ago, mike carey said:

Not true, the US has applied 10% tariffs as a baseline regardless of what applies to US exports. Australia has effectively no tariffs on US exports but we have 10% on our exports to the US.

Thank you for pointing that out.  I edited my comment above to reflect that.

I would like to point out that Australia does add a 10% value added tax to U.S. imports, which the U.S. hadn't applied to Australia imports.  So some may argue it's still reciprocal.  Some U.S. states charge no sale taxes, so they tax domestic products by corporate income tax and Australian products not at all.  Some may see the 10% tarrif in response to Australia 10% value added tax as applying equity, where previously it was cheaper to sell Australian goods to the U.S. than domestically because those wouldn't be subject to 10% value added tax.  Regardless, these modest changes will disrupt some industries in the short term but overall most are happy that inflation has been slowing recently.

Edited May 14 by Vegas_Millennial

[mike carey]

Australian GST doesn't put US products at any disadvantage to Australian products in our market. What taxes US jurisdictions apply to goods, whether they are from the US or anywhere else is a matter for them. If some choose not to tax goods at the point of sale, that's their decision not something that some other country has done to them. 

Australian and US internal tax arrangements (and their costs of production, including labour costs) each affect the prices they can afford to charge on products they export. We could claim that US national minimum wages that are lower than ours give your producers an unfair advantage selling into Australia. (We don't.)

[+ FrankR]

Multiple price hikes announced today by large firms (Addidas, Nike etc) which will impact inflation in the coming months.  May be a good time to revisit your budget for the rest of the year with this in mind.