President Trump’s steep tariffs have started to weigh on consumers’ wallets, sending prices higher as the White House readies a more drastic — and potentially costly — expansion of its global trade war.
The risks in Mr. Trump’s economic strategy began to show on Tuesday, with the release of data that found inflation had accelerated in June. Prices rose noticeably on appliances, clothing and furniture, products that are all heavily exposed to the president’s taxes on imports from Canada, China and other major trading partners.
The inflation report undercut Mr. Trump’s continued assertions that Americans would not face financial repercussions from his increasingly aggressive trade brinkmanship. Since taking office, the president has imposed withering duties on allies and adversaries alike, with additional taxes on a range of products such as cars and steel.
The latest reading of the Consumer Price Index recorded the first signs of what economists had predicted all along, with U.S. businesses and consumers shouldering a growing share of the burden from the taxes Mr. Trump has imposed on imports.
The data also carried perhaps a new warning for the president as he prepares another round of tariffs on dozens of countries in about two weeks, including a 30 percent tax on the European Union. Some experts said that an uptick in inflation could foreshadow more significant price increases later, especially if Mr. Trump proceeds as planned.
“Up until this report, you could have argued that inflation is on a journey lower,” said Padhraic Garvey, who leads ING’s research team for the Americas. “Now we are on a journey higher.”
The report released by the Bureau of Labor Statistics was not immediately “damning” for the Trump administration, Mr. Garvey said. But he added that the trend did not bode well for the White House and that it would become harder for Mr. Trump to deny his policies were affecting prices.
The White House opted to try to downplay the latest inflation gauge, which showed that prices overall rose 2.7 percent from a year ago, the swiftest pace since February.
Karoline Leavitt, the White House press secretary, focused on only one component of the report — a measure of consumer prices that excludes volatile products like food and energy — when she said on Tuesday that inflation had remained in line with analysts’ expectations.
“The numbers were very good, very much inside the margin,” Mr. Trump later told reporters. “So we’ve had no inflation. All we have is, we’re making a fortune.”
Economists have predicted for months that the president’s tariffs could destabilize the U.S. economy, rattle financial markets, constrain the nation’s growth and upend a healthy job market — all while causing prices to increase. But Mr. Trump has repeatedly dismissed those warnings while celebrating that his tariffs have helped to generate billions of dollars for the government.
The prospect of severe blowback initially prompted Mr. Trump to suspend his first set of eye-watering tariffs days after he announced them in April. But the pause, which aimed to buy time for the administration to broker trade deals, resulted in few agreements. Frustrated with the pace of talks, Mr. Trump began to revive his tariff threats this month in a series of letters that set a new Aug. 1 deadline.
Along with the European Union, major U.S. trading partners could face sharp increases in taxes on their imports starting in a matter of weeks. Tariffs on some Canadian goods would rise to 35 percent, and taxes on select Mexican products would be set at 30 percent. Additional steep duties are slated for other countries, including Brazil, Japan, South Korea and Thailand.
Gregory Daco, the chief economist for the consulting firm EY-Parthenon, estimated that the average tariff rate could increase to about 21 percent after Aug. 1. That could result in a “major risk for the economy,” he said.
On Tuesday, some of those risks started to become clearer.
While overall prices rose only slightly last month, some of the increases were more pronounced for specific products that tend to be vulnerable to tariffs. Prices for household furnishings jumped 1 percent, significantly higher than the 0.3 increase in May. Appliance prices rose about 1.9 percent, up from 0.8 percent. Prices on apparel, which had been declining, snapped back and increased by 0.4 percent in June.
Daniel Hornung, who served as the deputy director of the National Economic Council for President Joseph R. Biden Jr., said the data showed the “clear, initial signs of tariff effects.” He added that, “looking ahead, it’s likely those impacts will grow.”
Analysts at Goldman Sachs similarly found this month that consumers could tolerate a greater share of the costs of the president’s tariffs as they were fully carried out. By December, the trend could cause the inflation rate — as measured using a key gauge preferred by the Federal Reserve — to be a percentage point higher year over year than it would have been without steep taxes, according to the report.
Mr. Trump nonetheless appeared to ignore that data when he took to social media on Tuesday to assert one point: “Consumer Prices LOW.”
He coupled the comment with a renewed demand that the Fed immediately lower interest rates, which the central bank has left unchanged as it seeks to ensure the president’s tariffs do not worsen inflation. The Fed has remained cautious in the years after the coronavirus pandemic, when inflation reached a four-decade high of 9 percent.
But the wait-and-see approach has enraged Mr. Trump, who has savaged the Fed’s chairman, Jerome H. Powell, in recent months. The president repeated many of those attacks on Tuesday, telling reporters that Mr. Powell had done a “terrible job” as he demanded lower interest rates.
Earlier in the day, Treasury Secretary Scott Bessent said the White House had begun the process to identify Mr. Powell’s replacement, even though his term does not end until May. Mr. Bessent is seen as one of the candidates for the position.
Even some of the president’s allies conceded that a rate cut seemed unlikely at the Fed’s next meeting this month, now that there is evidence that Mr. Trump’s tariffs have affected prices throughout the economy. Stephen Moore, a conservative economist and former adviser to Mr. Trump, said the inflation report was “fine” but still showed that “the fight against inflation isn’t over, either.”
Mr. Moore predicted that the Fed was likely to “stand pat” at its next meeting, a move that could anger the president anew. But Mr. Moore said the White House needed to tread carefully, since a further acceleration in inflation could leave consumers and investors “nervous.”
“I think Trump and this White House have to be totally attentive to making sure inflation doesn’t go to 3 or 4 percent, or people will start to think, ‘Oh, these policies are a failure’,” Mr. Moore said.
Alan Detmeister, an economist who was formerly at the Fed, said he expected price pressures to intensify through the summer, though he noted that there was always volatility in monthly data like the government’s regular inflation report. One benchmark of inflation, the personal consumption expenditures index preferred by the Fed, was likely to eventually rise to about 3.4 percent once food and energy prices were removed, Mr. Detmeister said.
But his projection assumes that Mr. Trump’s tariff threats from the past week are not implemented. If those are indeed put in place, that could push up “core” inflation beyond 4 percent by the second quarter of next year, Mr. Detmeister warned.
“It could have a very big impact,” he said, “and it’s likely to continue for quite a while.”
Tony Romm is a reporter covering economic policy and the Trump administration for The Times, based in Washington.
Colby Smith covers the Federal Reserve and the U.S. economy for The Times.
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