In July, US prices saw a notable rise, according to key economic data released on Tuesday. This increase can be attributed to Donald Trump’s international tariffs, which are beginning to affect consumer costs significantly. The consumer price index (CPI), a measure that evaluates the prices of a basket of goods and services, reported that prices were up by 2.7% compared to the same month last year.
Although inflation had dipped in the spring months, the annualized rate has surged by 0.4% since April. The inflation rate remained stable between June and July; however, core inflation—which excludes the fluctuating prices of energy and food—rose by 3.1% in the last month, indicating a quicker pace than was observed in June. Notably, prices for takeout and restaurant meals increased by 3.9% over the past year, contributing to an overall rise in food prices by 2.9%.
In addition to food, prices for used cars, housing, and medical care have risen at rates exceeding the broader inflation average. Interestingly, overall energy prices decreased by 1.6% year-over-year, likely helping to stabilize the overall inflation rate. This report underscores the ongoing economic turbulence in the US, driven in part by Trump's sweeping changes to the nation's trading policies.
Despite claims from Republican leaders that the economy is “firing on all cylinders,” the effects of Trump's 10% universal tariff on imports, along with increased tariffs on key trading partners, are becoming more evident. On Monday, just hours before a midnight deadline, Trump announced a delay in the implementation of steep tariffs on China for an additional 90 days as negotiations continue.
While many tariffs only took effect on August 7, Trump's universal tariff, along with increased tariffs on industries such as steel and aluminum, has been in place since the spring. Economists have noted that the impact of tariffs on consumer prices typically takes time to manifest. Some retailers have been managing their inventory to mitigate the immediate effects of these tariffs and maintain price stability. However, the recent price increases indicate that companies are beginning to pass additional costs onto consumers, as leaders from major retailers like Walmart, Nike, and Macy’s have warned would likely happen.
The tariffs have also adversely affected the labor market more than many economists anticipated. Recent data revealed a dramatic downward revision of job figures, which originally indicated a robust job market. The government reported an addition of 291,000 jobs in May and June, but this figure was revised down to just 33,000.
The rise in prices, coupled with a shrinking labor market, has placed the US Federal Reserve in a challenging position. The Fed's dual mandate is to maximize employment while keeping inflation in check. President Trump has publicly criticized the Fed, asserting that it should lower interest rates to stimulate growth. Nevertheless, Fed officials have opted against adjusting rates, citing uncertainties regarding the impact of Trump's tariffs on overall prices.
In recent months, Trump has directed his frustration at economic officials, first targeting the Federal Reserve and then the Bureau of Labor Statistics (BLS), responsible for collecting and reporting economic data. Following the release of July's job figures, which revealed a sluggish month for job growth, Trump dismissed BLS commissioner Erika McEntarfer, making unfounded claims that the job figures were “RIGGED.” He subsequently nominated economist EJ Antoni, a known critic of the BLS, for the position.
After the latest inflation figures were revealed, Trump asserted, “It has been proven that even at this late stage, tariffs have not caused inflation or any other problems for America, other than massive amounts of cash pouring into our Treasury’s coffers.” He has also continued his attacks on Fed chair Jerome Powell, suggesting the possibility of legal action against Powell regarding expensive renovations to the Fed’s buildings. “Jerome ‘Too Late’ Powell must NOW lower the rate,” Trump stated on his social media platform, Truth Social. “I am considering allowing a major lawsuit against Powell to proceed because of the horrible, and grossly incompetent, job he has done in managing the construction of the Fed Buildings.”
