Greedflation' How tariffs could give companies an excuse to push up prices

In recent years consumers have grown used to seeing prices rise at an exorbitant rate. The cost of everything - from utility bills to bread - has rocketed in the worst inflation shock across advanced economies since the 1980s.

- Richard Partington

While inflation has cooled in the past year, talk of fast-rising prices is back on the agenda because of Donald Trump's trade war.

Most economists agree that imposing tariffs on imports from the US's largest trading partners will lead to higher prices for US consumers. The picture is not as clear for other countries. However, experts say the very idea that consumers are expecting a fresh inflation burst could become self-fulfilling by giving companies cover to put up their prices.

"A narrative [is needed] to tell consumers why prices are going up. Tariffs provide exactly that story," said Paul Donovan, the global chief economist at UBS Wealth Management.

"The fact we had the post-pandemic inflation waves has also changed things. Because we have had inflation in the past few years, consumers... are more accepting that this is what happens."

The Democratic senator Elizabeth Warren has said Trump's tariffs could lead to profiteering, giving corporations a "new set of excuses to price-gouge American consumers" and arguing that companies will probably put up prices even for goods that do not face them.

The phenomenon has been labelled as "greedflation", where businesses artificially inflate prices to increase profits rather than passing on legitimate cost increases to consumers.

This week Sony announced it was putting up the price of its PlayStation 5 by as much as 25% in some markets. While the Japanese company did not explicitly blame the Trump tariffs, instead citing a "challenging economic environment", analysts said the decision was more than likely an attempt to get ahead of them.

However, Sony pushed up prices in the UK, Europe, Australia and New Zealand - highlighting how multinationals could take such action even in non-tariffed markets amid the escalating cost of using complex international supply chains in a global trade war.