GTHT: Inflation "slowly heats up" provides the Federal Reserve with room for a rate cut in September, but whether it can initiate a series of rate cuts remains highly uncertain

According to the Zhitong Finance APP, Guotai Haitong Securities released a research report stating that the actual implementation of U.S. tariffs in the first half of the year was weaker than expected, and the pace of price increases by companies was relatively slow, resulting in a moderate rebound in inflation. In the second half of the year, the average actual import tariff rate in the U.S. is expected to rise further, and the pace of price increases by companies may accelerate. With stable demand, U.S. inflation may continue to "warm up" slowly. In the short term, this "slow warming" inflation provides the Federal Reserve with room for a rate cut in September, but whether it can continue to cut rates after September remains highly uncertain.

The main points from Guotai Haitong are as follows:

Tariff Policy: How much has the tax rate increased? In June, the actual average import tariff rate in the U.S. only increased by 6.6 percentage points compared to the end of 2024, which is significantly below market expectations. Changes in the structure of U.S. imports and the notably low proportion of taxable goods are the main reasons for the weaker-than-expected tariff collection. Looking ahead to the second half of the year, with the implementation of new tariff rates and the gradual rollout of industry tariffs, the average actual import tariff rate in the U.S. may rise further. However, attention should still be paid to whether the proportion of exempted goods in U.S. trade negotiations with other countries continues to increase.

Overseas Exporters: Will they lower prices to increase volume? The U.S. import price index is based on the dollar prices paid by importers and does not include tariffs, so it can be used to observe changes in U.S. import costs that include exchange rate effects. Since the implementation of equivalent tariffs in April, there has been no significant decline in the import price index for U.S. goods other than energy and food. Considering the continuous depreciation of the dollar since 2025, overseas exporters may lower prices to some extent, but the extent of the price reduction may be offset by the dollar's weakness. Overall, there has been no significant decline in U.S. import costs, and tariff costs are still mainly borne by U.S. companies and consumers.

U.S. Companies: May bear most of the tariffs. The transmission of tariff costs to companies is still relatively slow. As of June, U.S. companies may still bear about 63% of the tariffs, while consumers bear less than 40%. In the second half of the year, as inventory is gradually digested and trade policy uncertainty decreases, companies may continue to raise prices. However, considering the current sensitivity of consumers to prices, companies may still need to bear a considerable portion of the tariff costs.

Consumer Inflation: May gradually "warm up." Among goods, automotive parts, new cars, clothing and footwear, furniture and furnishings, and supplies have a high dependence on imports. However, the transmission of tariffs on new cars, clothing and footwear, personal care, and other durable goods is still not obvious. Overall, if the actual average import tariff rate in the U.S. rises by 10% within the year, under stable demand, tariffs may push the year-on-year growth rate of PCE to 3.1% and the year-on-year growth rate of core PCE to 3.4%; if demand significantly declines, it may help alleviate inflationary pressures in the U.S. In the short term, this "slow warming" inflation provides the Federal Reserve with room for a rate cut in September, but whether it can initiate consecutive rate cuts after September remains highly uncertain.

Risk Warning: The U.S. job market continues to deteriorate, and Trump is increasing pressure on the Federal Reserve