WSJ's Take On the Week The Consumer Shock From Tariffs Isn't Over. When Will Prices Peak?
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Feb 15, 2026 Frances Donald, chief economist at Royal Bank of Canada, explains the K-shaped economy in plain terms. She explores why retailers like Walmart can boom while many households struggle. She discusses tariff-driven price shocks and when they may peak. She also covers aging demographics, labor shortages and how AI might offset a shrinking workforce.
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K-Shape Masks Divergent Economic Cycles
- The K-shape reflects long-standing inequality but recently morphed into multiple diverging economic cycles.
- Aggregate data can hide divergent experiences so averages no longer tell the whole story.
Confidence Data vs. Actual Spending
- Consumer confidence weights every voice equally while spending is concentrated among the top.
- That mismatch explains why sentiment can be terrible even when aggregate spending holds up.
Ask Retailers About Tariff Pass-Through
- When listening to retailer earnings, probe for tariff exposure and price-pass-through plans.
- Expect tariff-driven price effects to peak around Q2 and continue influencing inflation later in the year.