LDN Business - US Inflation Rises

The tariff-driven inflation that economists feared begins to emerge

[July 16, 2025] By CHRISTOPHER RUGABER and JOSH BOAK

WASHINGTON (AP) — Inflation rose last month to its highest level since February as President Donald Trump's sweeping tariffs push up the cost of everything from groceries and clothes to furniture and appliances.

Consumer prices rose 2.7% in June from a year earlier, the Labor Department said Tuesday, up from an annual increase of 2.4% in May. On a monthly basis, prices climbed 0.3% from May to June, after rising just 0.1% the previous month.

Worsening inflation poses a political challenge for Trump, who as a candidate promised to immediately lower costs, but instead has engaged in a whipsawed frenzy of tariffs that have jolted businesses and consumers. Trump insists that the U.S. effectively has no inflation as he has attempted to pressure Federal Reserve Chair Jerome Powell into cutting short-term interest rates.

Yet the new inflation numbers make it more likely that the central bank will leave rates where they are. Powell has said that he wants to gauge the economic impact of Trump’s tariffs before reducing borrowing costs.

Excluding volatile food and energy, core inflation increased 2.9% in June from a year earlier, up from 2.8% in May. On a monthly basis, it picked up 0.2% from May to June. Economists closely watch core prices because they typically provide a better sense of where inflation is headed.

The uptick in inflation was driven by a range of higher prices. The cost of gasoline rose 1% just from May to June, while grocery prices increased 0.3%. Appliance prices jumped for the third straight month. Toys, clothes, audio equipment, shoes, and sporting goods all got more expensive, and are all heavily imported.

“You are starting to see scattered bits of the tariff inflation regime filter in,” said Eric Winograd, chief economist at asset management firm AllianceBernstein, who added that the cost of long-lasting goods rose last month, compared with a year ago, for the first time in about three years.

Winograd also noted that housing costs, a big inflation driver since the pandemic, have continued to cool, actually holding down broader inflation. The cost of rent rose 3.8% in June compared with a year ago, the smallest yearly increase since late 2021.

“Were it not for the tariff uncertainty, the Fed would already be cutting rates,” Winograd said. “The question is whether there is more to come, and the Fed clearly thinks there is,” along with most economists.

Some items got cheaper last month, including new and used cars, hotel rooms, and airfares. Travel prices have generally declined in recent months as fewer international tourists visit the U.S.

A broader political battle over Trump’s tariffs is emerging, a fight that will ultimately be determined by how the U.S. public feels about their cost of living and whether the president is making good on his 2024 promise to help the middle class.

The White House pushed back on claims that the report showed a negative impact from tariffs, since the cost of new cars fell despite the 25% tariffs on autos and 50% tariffs on steel and aluminum. The administration also noted that despite the June bump in apparel prices, clothing prices are still cheaper than three months ago.

“Consumer Prices LOW,” Trump posted on Truth Social. “Bring down the Fed Rate, NOW!!!”

For Democratic lawmakers, the inflation report confirmed their warnings over the past several months that Trump’s tariffs could reignite inflation. They said Tuesday that it will only become more painful given the size of the tariff rates in the letters that Trump posted over the past week.

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A person pays with cash at a Halal food truck, July 13, 2022, in New York. (AP Photo/Julia Nikhinson, file)

“For those saying we have not seen the impact of Trump’s tariff wars, look at today’s data. Americans continue to struggle with the costs of groceries and rent — and now prices of food and appliances are rising,” said Sen. Elizabeth Warren, D-Mass.

Many businesses built up a stockpile of goods this spring and were able to delay price hikes, while others likely waited to see if the duties would become permanent.

More businesses now appear to be throwing in the towel and passing on costs to consumers, including Walmart, the world’s largest retailer, which has said it raised prices in June. Automaker Mitsubishi said last month that it was lifting prices by an average of 2.1% in response to the duties, and Nike has said it would implement “surgical” price hikes.

Powell said last month that companies up and down the supply chain would seek to avoid paying tariffs, but that ultimately some combination of businesses and consumers would bear the cost.

“There’s the manufacturer, the exporter, the importer, the retailer, and the consumer, and each one of those is going to be trying not to be the one to pay for the tariff,” the Fed chair said. “But together, they will all pay for it together—or maybe one party will pay it all. But that process is very hard to predict, and we haven’t been through a situation like this.”

Trump has imposed sweeping duties of 10% on all imports plus 30% on goods from China. Last week the president threatened to hit the European Union with a new 30% tariff starting Aug. 1.

He has also threatened to slap 50% duties on Brazil, which would push up the cost of orange juice and coffee. Orange prices leaped 3.5% just from May to June, and are 3.4% higher than a year ago, the government said Tuesday.

Overall, grocery prices rose 0.3% last month and are up 2.4% from a year earlier. While that is a much smaller increase than after the pandemic, when inflation surged, it is slightly bigger than the pre-pandemic pace. The Trump administration has also placed a 17% duty on Mexican tomatoes.

Families have cut spending on food as prices rise. Cassidy Grom, 29, her husband, and his mother are eating out less and try to stretch grocery store rotisserie chickens as far as possible, using them in salads and the bones for soup.

“It feels like a miracle if I'm able to leave the grocery store without spending $100,” the Edison, New Jersey resident said. “We’re trying to save for a house, we’re trying to save for a family, so prices are really on our mind.”

Accelerated inflation could provide a respite for Powell, who has come under withering fire from the White House over interest rates.

The Fed chair has said that the duties could both push up prices and slow the economy, a tricky combination for the central bank since higher costs would typically lead the Fed to hike rates while a weaker economy often spurs it to reduce them.

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