Inflation Driven by Tariffs Begins to Appear, as Economists Feared

(VOR News) – President Donald Trump’s tariffs raised food, clothes, furniture, and appliance prices, causing February inflation.

The Labor Department reported a 2.7% annual consumer price increase in June, up from 2.4% in May. From May to June, prices rose 0.1%, or 0.3%.

Trump promised to decrease prices quickly yet placed taxes on businesses and consumers due to inflation.

Fed Inflation Chair Jerome Powell gets pushed to lower short-term rates by Trump.

Inflation data makes the central bank more likely to maintain interest rates. Before lowering borrowing prices, Powell wants to evaluate Trump’s tariffs’ economic impact.

Core inflation rose to 2.9% in June from 2.8% in May. Monthly growth was 0.2% from May to June. Economists monitor core pricing because it better predicts inflation.

Multiple price hikes caused inflation. Between May and June, merchandise prices rose 0.3% and gas prices 1%. Appliance prices rose for a third month. Imported goods such as shoes, toys, garments, sports gear, and audio equipment are more expensive.

“Scattered bits of the tariff inflation regime are starting to filter in,” said Alliance Bernstein chief economist Eric Winograd. He said durable goods were more expensive last month than a year earlier for the first time in three years.

Winograd noted that housing expenses, a significant contributor to inflation since the pandemic, have fallen. The June annual rent increase was 3.8%, the lowest since late 2021.

“Were it not for the tariff uncertainty, the Fed would already be cutting rates,” he said. “The question is whether there is more to come, and the Fed clearly believes there is,” economists say.

Last month, motels, cars, and flights became cheaper. Travel costs in the US have dropped due to fewer international visitors.

The political argument over Trump’s tariffs will hinge on Americans’ cost of living and whether the president achieves his 2024 promise to help the middle class.

Despite 25% tariffs on cars and 50% on steel and aluminum, the White House stated tariffs cut the cost of new cars. The organization noted that garment prices are lower than three months ago despite the June hike.

Trump posted, “Consumer prices are low.” Fed rate should be lowered, now.

The inflation number confirmed Democrats’ concerns that Trump’s tariffs would cause inflation. On Tuesday, they said Trump’s tariffs from the week will worsen the issue.

Don’t think Trump’s tariffs are bad? Look at today’s stats. Elizabeth Warren says, “Americans are paying more for groceries, rent, and now food and appliances.”

Many firms saved money this spring and delayed price increases while waiting to see if the duties were permanent. Walmart, the world’s largest retailer, quit and raised prices in June. Mitsubishi raised prices 2.1% last month, while Nike would conduct “surgical” price hikes due to tariffs.

Powell said last month that while supply chain companies will seek to avoid tariffs, some businesses and consumers may pay.

The Fed chairman told reporters, “Everyone will try to avoid the tariff: manufacturer, exporter, importer, retailer, and consumer.” Someone may pay for everything, or everyone may contribute. This strategy is new and surprising.

Trump imposed a 10% import tax and 30% tariff on China. On Monday, the president threatened to impose a 30% tariff on the EU starting August 1. He also pledged a 50% tariff on Brazil, raising orange juice and coffee prices. On Tuesday, the government reported that orange prices rose 3.5% from May to June and 3.4% from a year earlier.

Grocery prices rose 0.3% last month and 2.4% annually. Despite this tiny increase, inflation is higher than before the outbreak. Mexican tomatoes are taxed 17% under Trump.

Families are spending less on food as costs climb. Cassidy Grom, 29, her husband, and his mother make soups and salads with rotisserie chickens from the grocery store instead of eating out.

Edison, New Jersey:

“It feels like a miracle if I can leave the grocery store without $100.” “We’re trying to save for a house, we’re trying to save for a family, so prices are really on our minds.”

Powell, who has faced criticism from the White House over interest rates, would benefit from faster inflation.

The Fed chair warned that taxes could increase costs and harm the economy, as higher prices raise rates and a weaker economy lowers them.

SOURCE: AP