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Tariffs

Inflation Accelerates as Trump's Tariffs Bite

Strategic Insights

— 2 min read

Consumers are starting to feel the pinch of President Trump's tariffs, with the latest data showing a significant increase in prices for household furnishings, appliances, and apparel in June. The White House has downplayed the impact, but economists and experts warn that the trend is a clear sign of the effects of Trump's trade policies. As the president prepares to impose even steeper tariffs on dozens of countries, including a 30% tax on the European Union, the risk of further price increases and a destabilized economy grows.

Key Takeaways:

  • The Consumer Price Index (CPI) rose 2.7% in June, the fastest pace since February, as prices for household furnishings, appliances, and apparel increased.
  • The increases in prices for these products were more pronounced, with household furnishings jumping 1% and appliance prices rising 1.9%.
  • Economists warn that the trend is a sign of the effects of Trump's tariffs and that prices could continue to rise as more tariffs are imposed.
  • The White House has played down the impact, with President Trump asserting on social media that "Consumer Prices LOW." However, experts say the trend is clear and that the president's policies are affecting prices.
  • Additionally, prices for apparel increased by 0.4% in June, a significant increase after declining.
  • The average tariff rate could increase to about 21% after Aug. 1, resulting in a "major risk for the economy," according to Gregory Daco, chief economist for EY-Parthenon.
  • The trend could cause the inflation rate to be a percentage point higher year over year than it would have been without steep taxes by December, according to analysts at Goldman Sachs.
  • Even some of the president's allies conceded that a rate cut seemed unlikely at the Fed's next meeting, now that there is evidence that Trump's tariffs have affected prices throughout the economy.
  • Alan Detmeister, an economist and former Fed official, warned that price pressures could intensify through the summer, and that core inflation could rise beyond 4% by the second quarter of next year if Trump's tariff threats are put in place.

Statistics:

  • The Consumer Price Index (CPI) rose 2.7% in June, the fastest pace since February.
  • Prices for household furnishings jumped 1% and appliance prices rose 1.9% in June.
  • Apparel prices increased by 0.4% in June.
  • The average tariff rate could increase to about 21% after Aug. 1, resulting in a "major risk for the economy," according to Gregory Daco, chief economist for EY-Parthenon.
  • The trend could cause the inflation rate to be a percentage point higher year over year than it would have been without steep taxes by December, according to analysts at Goldman Sachs.
  • Core inflation could rise beyond 4% by the second quarter of next year if Trump's tariff threats are put in place, according to Alan Detmeister.

Sources:

  • "The New York Times"
  • "Bloomberg"
  • Bureau of Labor Statistics
  • ING
  • Goldman Sachs
  • EY-Parthenon
  • Federal Reserve

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