Countdown to soaring U.S. prices? Experts warn: Inflation pressure temporarily hidden in inventory phase, holiday season may become the outbreak point

According to Zhitong Finance APP, although the US CPI and PPI continue to rise rapidly, there has not been a significant increase in the price of various goods. However, logistics experts warn that the higher prices are currently hidden in the "mid-stage transportation" phase, which includes warehouses and distribution centers, and will become apparent in the future.

The erratic tariff policies of the Trump administration have led US importers to rush shipments to reduce tariff costs, resulting in a backlog of goods in warehouses. Zachary Rogers, an assistant professor of supply chain management at Colorado State University and a key compiler of the Logistics Manager Index, explains that the increase in inventory is the reason why tariff-related price increases have not yet fully manifested.

Rogers stated, "Currently, we see price increases for back-to-school items such as children's clothing and toys. However, consumers have not yet felt the true significant impact of inflation because these cost pressures are still at the intermediate stage (warehouses). I expect inventory to decline in September."

Rogers pointed out that retailers' inventory typically peaks in mid-October, but this year, due to early stocking, warehouse capacity has also moderately expanded, leading to price increases. Rogers said, "Essentially, this tells us that the arrival of the peak season presents a polarized situation."

Mike Short, president of C.H. Robinson Worldwide's global logistics business, stated in an interview that this year's holiday season goods (soon to be placed on store shelves) have been stocked two to three months earlier, and these goods are currently stored in warehouses. However, compared to last year, sales this year are not as strong.

Short noted, "We find that some customers have to transport this inventory to their own distribution centers and bear the associated costs. Whether these (storage costs) will be passed on to the final consumers depends on the specific situation, as this will be distributed across various stages. Moreover, this is also related to tariffs and storage costs. Our customers consider these factors comprehensively when making decisions."

Short stated that they are actively communicating with customers to explore how to effectively manage inventory and transport goods in a timely and efficient manner. Short said, "What we have learned from our customers is that supply chain costs used to be just a separate item on their income statements, but now it has become an important discussion topic at the board level."

The increase in the volume of goods transported may be a mitigation measure taken to avoid higher tariffs, but this has made warehouse space tighter, leading to price increases.

Karl Siebrecht, CEO of flexible warehousing company Flexe, stated that among their corporate clients and mid-market clients, they have found an increased demand for flexible warehousing from some importers and distributors to buffer their fourth-quarter inventory. He said, "They are stocking up early to complete transactions before the tariffs take effect. Meanwhile, due to the ongoing uncertainty regarding tariffs and the overall decline in consumer confidence, many retailers have low inventory levels."

Siebrecht pointed out that goods shipped from warehouses will begin to arrive at retailers' distribution centers in September and October. Siebrecht explained, "This batch of inventory will then start to be shipped out in late October and early November to ensure timely replenishment to retail stores and to stock up goods for e-commerce distribution centers for Black Friday events By mid-December, the replenishment work for retail stores and distribution centers will continue.

This inventory backlog situation is also reflected in the operations of the busiest ports in the United States. Gene Seroka, the executive director of the Port of Los Angeles, stated that as of now, a large number of ships docked at the port in August, which is "quite significant."

Seroka said, "It's less than in July and also less than last August, but that's due to the increase in inventory. So it's not a bad month, but to be honest, I think we will soon see a reduction in products, simply because there is too much domestic inventory."

The constantly changing tariff situation has also impacted the supply chain. Vietnam, which has benefited from the "China +1" strategy, is now facing a 30% transshipment fee. Short stated that this fee, combined with the 50% tariff recently imposed on India, indicates the volatility of the business environment, especially as China continues to seek new product export destinations.

The "China +1" strategy refers to the trend of countries like the U.S., Europe, and Japan, which have concentrated their investments in China since the 1990s, to shift various industries to emerging economies like Vietnam and India to avoid the risks of overly concentrated supply chains.

Short said, "We are seeing an increase in freight volume from China to Europe, an increase in freight volume to Mexico, and an increase in freight volume to Southeast Asia, or an increase in freight volume originating from Southeast Asia. But to be honest, so far, the freight volume from all of Asia to the U.S. has remained relatively stable. What will happen in the future is uncertain, but the situation is not as bad as people feared when the tariff issue first arose."

It remains unclear how consumers will react once this supply chain situation leads to rising commodity prices. Peter Boockvar, chief investment officer of Bleakley Advisory Group, stated that consumers are still haunted by the price spikes of 2021 and 2022, which is one of the reasons overall consumer confidence is "well below pre-pandemic levels."

He said, "People can no longer tolerate further increases in the cost of living, regardless of whether tariffs are just a one-time price increase. For them, this is another inflation pain point, and more tariff impacts are still to come."