February inflation data suggests that price pressures were in an OK place ahead of the military action in Iran, James Knightley, chief international economist, U.S., ING said in a note to clients. But with energy costs on the rise and concerns about supply bottlenecks in the region, we are likely to see a return of 3%+ headline inflation in coming months.

Import prices are continuing to rise and consumers prices look benign, which means, Knightly says, the extra $25-$30 billion of tariff costs per month are being borne by Corporate America.

"Productivity gains are often cited as a factor limiting the inflation effect, but we note that imports are rising quickly again now that all the pre-tariff inventory build from late 2024/early 2025 has been exhausted. That suggests more tariff costs to come. As such, we can’t exclude the possibility that tariffs will eventually have a more noticeable impact on prices, he said."