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Illustration: Sarah Grillo/Axios

A logjam of inflationary pressures is starting to hit the U.S. all at once, and will challenge the persistent low inflation that has been a hallmark of the economy for more than a decade.

What's happening: The biggest single inflationary catalyst is the trade war between the U.S. and China. Major companies, including Walmart and Macy's have already warned that tariffs will force them to raise prices.

Where it stands: UBS analyst Jay Sole said in a weekend note to clients that 25% tariffs on Chinese imports could accelerate pressure on companies' profit margins and put $40 billion of sales and 12,000 stores at risk.

  • And that's just one inflationary input.

What to watch: Oil prices hit a 3-week high Monday and look poised to rise further given the possibility of OPEC production cuts and U.S. sanctions on Venezuela and Iran.

  • Gas prices have managed to hold steady throughout much of the U.S. this year, but they now are facing a doubled-edged sword: the transition to more expensive summer gasoline blends and lower U.S. gasoline stocks, which are currently at a 7 million barrel deficit from 2018.

U.S. wages have picked up, particularly among low-wage workers as more municipalities and companies like Amazon and Target push through minimum-wage increases.

Perhaps most importantly, U.S. interest rates, which have remained low thanks to the Fed and market expectations for rates cuts, are facing "exploding US deficits and debt and foreign investors’ waning appetite for US debt," says Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management.

  • Yields on the benchmark 10-year Treasury note have fallen to the lowest levels of the year but a spate of weak auctions recently — producing the lowest bid-to-cover ratios since the financial crisis — have analysts like Shalett looking for a reversal.

Yes, but: The country has faced many of these headwinds before. The big question now is whether these catalysts will lead to higher prices for consumers or if businesses will eat the increased costs, lowering profit margins and reducing revenue.

The bottom line: Data shows that near- and even medium-term inflation expectations remain low for the public and for Wall Street. The stock market continues to rise, backed by high profit margins and revenues. Something has to give.

Go deeper: Lack of U.S. inflation forces another look at long-held economic beliefs

Go deeper

Mike Allen, author of AM
2 hours ago - Politics & Policy

Fauci fires back at Rand Paul for slam on tonight's "Axios on HBO"

Responding to charges by Sen. Rand Paul on Sunday's "Axios on HBO," NIAID director Anthony Fauci told "ABC This Week" that it's "molecularly impossible" for U.S.-funded bat virus research in China to have produced COVID-19.

Why it matters: The issue 0f Wuhan research was reignited on the right last week with a National Institutes of Health letter to Congress disclosing more about the research.

Manchin, Schumer huddle with Biden in Delaware to discuss spending bill

Senate Majority Leader Chuck Schumer (L) and Sen. Joe Manchin (R) at the U.S. Capitol on Nov. 13, 2014. Photo: Win McNamee/Getty Images

Sen. Joe Manchin (D-W.Va.) will meet with President Biden and Senate Majority Leader Charles Schumer (D-N.Y.) on Sunday morning in Delaware as Democrats look to reach an agreement on the massive spending measure.

Driving the news: Democrats are still negotiating what to keep in the bill and how to pay for it, with Biden saying on Thursday that the party does not have the votes to raise the corporate tax rate.

4 hours ago - Technology

Scoop: Facebook exec warns of "more bad headlines"

Illustration: Megan Robinson/Axios

In a post to staffers Saturday obtained by Axios, Facebook VP of global affairs Nick Clegg warned the company that worse coverage could be on the way: “We need to steel ourselves for more bad headlines in the coming days, I’m afraid.”

Catch up quick: Roughly two dozen news outlets had agreed to hold stories based on leaked materials from Facebook whistleblower Frances Haugen for Monday publication — but the embargo fell apart Friday night as participating newsrooms posted a batch of articles ahead of the weekend.