Trump's Tariff Turmoil: Why Mohamed El-Erian Believes The Real 'Tax' Is Yet To Be Felt

While consumers have been largely shielded from the immediate price hikes expected from the latest round of U.S. tariffs, a period of reckoning may be approaching, according to top economist Mohamed A. El-Erian.

Tariff-Related Price Increases Could Be Felt Unevenly Across Economy

In a recent analysis, El-Erian argues that the real impact of the tariffs—what some critics have labeled a direct “tax” on Americans—has been delayed, not dismissed, and is poised to be felt unevenly across the economy.

The central mystery of the new tariff regime has been the absence of a significant, widespread spike in consumer prices. El-Erian explains that a combination of strategic corporate decisions and inventory management has created a temporary buffer.

Why Have Consumers Not Felt The Pressure Yet?

Erian explains that many foreign exporters and U.S. importing companies initially chose to absorb the tariff costs within their profit margins rather than risk losing market share over what they hoped might be a temporary policy. This absorption was the first line of defense for the American consumer’s wallet.

Further softening the blow, many businesses stockpiled imported goods before the tariffs took effect. This allowed them to sell products at pre-tariff prices for an extended period, further masking the policy’s inflationary potential.

Tariffs Would Ultimately Raise Taxes On Americans

Erian’s view provides a more nuanced timeline for the argument made by commentators like investor Ross Gerber, who stated on X that tariffs are a consumption-based tax, contrary to their intended use as a trade policy tool for reshoring manufacturing, as they have been promoted.

Several other prominent experts have echoed similar views in recent weeks, with investor Kevin O'Leary calling it a value-added tax on American consumers.

According to El-Erian, the pass-through of these costs will not be uniform. The ultimate burden on consumers will depend heavily on the nature of the goods they buy.

Demand Elasticity Will Determine What Becomes Expensive

Businesses selling products with “inelastic demand”—essential items that consumers will purchase regardless of price changes—are far more likely to pass on the full tariff cost. In contrast, companies serving lower-income consumers or selling goods with “elastic demand” will face a tougher choice, as significant price hikes could destroy demand for their products.

The result, El-Erian suggests, will be a varied and complex economic landscape where the impact of tariffs is felt differently not just between sectors, but from company to company and even from product to product.

Price Action

The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, rose in premarket on Friday. The SPY was up 0.19% at $636.74, while the QQQ advanced 0.089% to $563.78, according to Benzinga Pro data.