The terrible inflation economists predicted would follow President Trump’s tariffs hasn’t materialized—at least not yet.

Import duties are collected as goods enter through U.S. customs, and it can take months for items made in Asia to cross the Pacific and effect prices on store shelves.

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

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

In June, the Consumer Price Index was up 2.7% from a year earlier—in January, that figure was 3.3%.

Where’s the beef!

We’ll see more price increases later this summer but not the hellacious inflation feared—the University of Michigan Survey indicates consumers are still expecting 4.4% inflation over the next year.

When estimating the potential price effects, it’s important to remember that tariff rates are assessed on the prices importers pay abroad—the factory gate prices or values when those are loaded on the ship—and not full U.S. retail prices.

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

An iPhone 15 Pro retails for $1100 but only costs half as much to actually 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.

For each of those services, labor is a huge component of cost, and businesses are finding ways to use less of it.

Despite robust growth and rising profits, U.S. publicly traded companies have reduced their white-collar work forces 3.5% over the past three years. Even with sales up 40%, Walmart employees 100,000 fewer people than a decade ago.

Now workforce downsizing is accelerating with the advent of AI agents that can quickly gather and assess information, draw inferences and complete complex tasks working alongside humans. For example, one software engineer can complete the work of many.

Even profitable, growing companies like Microsoft are announcing layoffs, replacing fewer workers who quit and relying on slimmer teams and shorter timelines to get things done.

Walmart aims to use AI to compress the cycle to design, manufacture and bring to market store brand apparel by up to 18 weeks—a major savings of employee time.

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

AI is expected to replace 200,000 jobs at global banks. Throughout the economy, AI has the potential to boost annual productivity growth by 0.8% to 1.5%.

This year, tariffs have likely lowered GDP growth about 1.5% and even when we return to about 2% as expected next year, productivity advances could outpace economic growth. Then the net increase in overall private sector demand for additional 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 give added impetus to accelerating the buildout of AI to replace people and impose heavy downward pressure on wages.

This process could outrun the tariffs and prices could fall—deflation instead of inflation.

In China, the housing market collapse destroyed a lot of household wealth, consumers pulled back, deflation ensued and now Chinese leaders railing against price wars and excessive competition.

Trump’s tariffs are hardly responsible for all the turbulence in U.S. labor markets, but they put a lot of pressure on business to find savings. AI to jettison employees may be just the ticket.

Equities will do well—AI presents great opportunities to boost profits.

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

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

It was a period of profound technological progress. Great fortunes were made but alongside appalling conditions for ordinary workers.

Jeff Bezos’ extravagant wedding occurred the same week that his Amazon announced another round of layoffs.

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