OPINION:

The terrible inflation economists predicted from President Trump’s tariffs hasn’t materialized, at least not so far.

Tariffs are assessed as goods enter through U.S. customs, and it can take months to cross the ocean and for tariffs to get into retail prices.

When Mr. Trump raised tariffs on washing machines in January 2018, the Consumer Price Index for laundry equipment rose only somewhat in April and not greatly until May.

In February and early March, Mr. Trump began with tariffs on China, Mexico and Canada. By mid-April, he had announced taxes on automobiles, steel and aluminum, and broader “reciprocal tariffs” on most other trade.

In June, the Consumer Price Index was up 2.7% from a year earlier. In January and June 2024, that figure was 3.0%.

Where’s the beef?

We’ll see more price effects later this summer, but perhaps not the hellacious inflation feared. The University of Michigan Survey indicates that consumers still expect 5% inflation over the next year.

Tariffs are assessed on the prices importers pay abroad — think of those as either factory gate prices or the cost when goods are loaded onto ships — and not full U.S. retail prices.

Some prices jump directly with acquisition costs and tariffs: fresh produce, for example, because the post-farm processing is minimal and grocers’ margins are thin. However, for many products, the import component is small.

An iPhone 15 Pro that retails for $1,100 but costs only half as much to manufacture. Product development, transportation, marketing, software and other services are the rest, and many of those either reside here or aren’t subject to tariffs.

By good fortune for American businesses, but not great luck for the ordinary workers, labor is a big component of cost at almost every step, and businesses have been finding ways to use less of it over the past decade.

Despite robust growth and rising profits, U.S. publicly traded companies have reduced their white-collar workforces 3.5% over the past three years.

Now workforce downsizing is accelerating with the advent of artificial intelligence agents that can quickly gather and assess information, draw inferences and complete complex tasks on behalf of humans, or work alongside them. (For example, enabling two insurance claims adjusters to complete the work of three or more.)

Walmart employs 100,000 fewer people than a decade ago, but its sales are up 40%. Now, it aims to use AI to shorten the timeline to bring in-house apparel to market by up to 18 weeks. Shorter timelines mean fewer people.

These days, even profitable companies such as Microsoft frequently announce layoffs, replace fewer workers who leave and rely on slimmer teams to get things done.

CEOs are apologizing less for the pain layoffs impose because their boards understand that if they don’t do more with fewer people, their competitors will and will undercut them on price and score bigger stock gains.

In January, economists expected growth to slow to about 2% from 2.8% the past two years. Even with that modest downshift, white-collar workers who lost their jobs faced considerably more difficulty finding new positions.

The scary part is that businesses are always finding new ways to do more with less, and AI has the potential to further boost annual productivity growth by 0.8% to 1.5%.

This year, tariffs have likely lowered gross domestic product growth to 1.5%. Even when we return to about 2% as expected next year, productivity growth could exceed economic growth. The net increase in overall private sector demand for new workers could be quite low or become persistently negative.

With consumers cutting back, many businesses lack the pricing power to push along the costs imposed by the tariffs.

Businesses will be forced to find savings elsewhere to keep profits growing and investors happy. This will accelerate the buildout of AI to replace people and add downward pressure on wages.

This process could outrun the tariffs, and prices would fall: deflation instead of inflation.

In China, the housing market collapse destroyed a lot of household wealth. Consumers pulled back, and deflation ensued. Now, Chinese leaders are warning major auto producers not to be overzealous about cutting prices.

Mr. Trump’s tariffs alone are not responsible for all this, but they are putting a lot of pressure on businesses to find savings. Using AI to jettison employees may be just the ticket.

Equities will do well. AI presents great opportunities to pad profits.

The tariffs may give America more manufacturing jobs, but well-paying, white-collar jobs will remain scarce and downward pressure on wages will be substantial.

Mr. Trump’s Golden Age may look more like the Gilded Age.

It was a period of profound technological progress that helped drive down prices: deflation. Great fortunes were made, but alongside appalling conditions for ordinary workers.

Jeff Bezos’ extravagant wedding in Venice occurred soon after his Amazon announced another round of layoffs.

• Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.