Push up inflation

Trump tariffs push up inflation despite pressure on Fed to cut rates

The White House has been trumpeting the absence of tariff-related price hikes as a sign that the president’s agenda is succeeding.

By Sam Sutton

Inflation rose in June as President Donald Trump’s tariffs began to push up the prices of certain goods, undermining his attempts to pressure Federal Reserve Chair Jerome Powell to lower interest rates.

The Consumer Price Index increased at an annual rate of 2.7 percent, after rising 2.4 percent in May, as the impact of taxes on imports started to become visible at checkout. While housing prices — as well as volatile food and energy prices — contributed heavily to the uptick, tariff-sensitive products like apparel and household furnishings also reported sizable gains. Core inflation, which excludes food and energy costs, rose at an annual rate of 2.9 percent.

“Inflation is picking up and we’re starting to see evidence of tariffs in the realized data,” said James Egelhof, the chief U.S. economist at BNP Paribas.

Solid labor market data suggests that Americans are in a good position to weather higher prices, and businesses are passing some of the import costs along to consumers, Egelhof said. “Absent tariffs, the economy was on course to a soft landing.”

The Labor Department report lands as Trump and top administration officials move ahead with a massive pressure campaign to persuade Powell to reduce borrowing costs as soon as possible.

Trump’s repeated and personal attacks on the Fed chair — whom he has dubbed a “numbskull” for keeping rates elevated — have dovetailed with an investigation by White House budget chief Russ Vought into a costly renovation of the central bank’s headquarters.

The White House has trumpeted the absence of tariff-related price hikes as a sign the president’s agenda is succeeding despite growing costs borne by U.S. companies that rely on imports. Shortly after the report was released, White House press secretary Karoline Leavitt touted the $100 billion in revenue that has been generated by Trump’s tariffs so far this year.

But Powell has repeatedly said the Fed won’t rush to lower rates until policymakers have a clearer understanding of how the president’s tariffs — which were much larger than the central bank anticipated — affect prices.

While some Fed policymakers say they would be open to lowering rates at the July 29-30 meeting, that’s now unlikely. Investors have assigned a 97.4 percent likelihood that the central bank will keep short-term rates at 4.25 percent to 4.5 percent.

In a note to clients, Samuel Tombs of Pantheon Macroeconomics called the CPI report a “knock-out punch to the tariff inflation deniers.”

A White House official granted anonymity to discuss the inflation outlook said it would be a mistake to read too much into a single report, saying that prices in some tariff-sensitive categories — most notably autos — declined last month.

“Every month since President Trump took office, core inflation — the best measure of inflation — has beat or matched expectations,” Leavitt said in a statement. “The data proves that President Trump is stabilizing inflation and the panicans continue to be wrong about tariffs raising prices.”

Democrats are seizing on the new data to argue that their warnings about Trump’s agenda are beginning to be realized.

“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,” Sen. Elizabeth Warren (D-Mass.) said in a statement. “Families were already getting crushed, and the President’s making it worse.”