The president wants U.S. firms to “eat” the cost of his tariffs. Fresh price-growth data will show whether he’s getting his wish.
The monthly inflation report set to be released Wednesday by the Bureau of Labor Statistics is expected to provide the most definitive look yet at whether U.S. companies are passing the cost of President Donald Trump’s higher import duties on to customers.
And there’s some anticipation that inflation has ticked up. The Consumer Price Index, which tracks changes in prices for consumer goods and services, is forecast to show a 12-month increase of 2.4% in May, compared with a 2.3% annual pace in April, according to a survey by Dow Jones Newswires.
“Core” inflation, a measure closely watched by economists that excludes prices for food and energy, which tend to fluctuate more, is expected to rise 2.9% over the year, up from 2.8% in April. The core month-on-month reading was expected to climb to 0.3% from 0.2% in April.
The president’s on-again, off-again tariffs and trade-deal announcements have scrambled the spending plans of businesses and consumers. As a result, sentiment surveys have shown deteriorating confidence since April, when Trump rolled out his “Liberation Day” tariffs that reset the base U.S. import duty level to 10%.
Trump campaigned on promises to bring price relief to Americans, but economists say his tariffs by definition will lead to price increases.
As price pressures from the tariffs have begun to build, businesses are signaling they will pass along higher prices to customers — in spite of Trump’s warnings not to do so.
Walmart said last month that consumers would soon start seeing higher costs. The National Federation of Independent Businesses reported Tuesday that a net 31% of its surveyed members planned price hikes last month, up from 28% in April.
“Walmart making their announcement that customers are going to start seeing higher prices really underscores how businesses are starting to feel this,” said Stephen Kates, financial analyst with Bankrate. “And if the largest businesses are saying this, smaller businesses are definitely feeling it, too — there’s no way around that fact.”
Walmart responded to Trump’s threats by saying it would “keep prices as low as we can for as long as we can given the reality of small retail margins.”
Price inflation is already hitting other parts of the economy. In May, U.S. factories registered the highest share of price-increase reports since November 2022, S&P Global, a data and business consultancy group, said last week.
And firms quoted in the Institute of Supply Management’s latest manufacturing report noted the president’s tariffs have wreaked havoc on their ability to plan for the future as they deal with the prospect of higher costs.
If there has been any price relief, it is likely the result of an overall slowing economy, analysts say, with a weakening labor market forcing consumers to cut back on spending. The pace of airfare, hotel and gas-price growth was likely lower in May as customers reduced their travel, with new Bank of America data showing spending rates remain below levels seen before Trump took office.
Even if May’s price-growth data comes in milder than expected, economists say past experience suggests the coming months will more fully capture the impact from the tariffs. In a note to clients this week, Pantheon Macroeconomics analysts said it took a full three months before the price increases from Trump’s 2018 washing machine tariffs showed up in data — but that when they did, the pass-through was “rapid and complete.”
That suggests it would take until July for the tariffs — the bulk of which were announced in April — to begin to fully appear.
Even if the pace of price growth is no longer at the pace seen in 2022, when inflation rates reached levels not seen in decades, Bankrate’s Kates said consumers are still going to be left smarting.
“It’s going to be a persistent itch that doesn’t go away,” Kates said.
