Tariff fans have been boasting that President Trump’s import taxes are raising federal revenue without contributing to inflation. They were premature.
Inflation data for June shows notable monthly price increases in several categories dominated by imports, such as appliances, sporting goods, and toys. The price hikes aren’t draconian, but they’re what economists have been expecting to see as importers paying the higher taxes begin to pass them onto their own customers.
“The increase in household appliances, apparel, and toys highlight that tariffs are being passed onto the consumer,” Oxford Economics explained in a July 15 analysis. “We expect tariff revenues to continue to trend higher over the next few months. Tariff impacts on the economy are still in the pipeline.”
The overall year-over-year inflation rate jumped from 2.4% in May to 2.7% in June. Housing inflation remained at 4%, slightly above the annual gain in earnings, which is 3.7%. Gasoline prices were down but electricity prices were up on an annual basis.
Economists, however, are looking hardest for signs of tariff impacts — and finding them. Seeing those requires looking at month-to-month price changes, which are normally so small that consumers don’t notice. But a few consecutive months of price hikes become sticker shock, and economists think that trend has begun.
The monthly price change for all goods was flat or negative in March, April, and May, for instance. But in June, goods prices rose 0.3%, the biggest jump since January. Maybe nothing. But if that reflects the higher costs of the Trump tariffs, it is likely to keep rising on a monthly basis, becoming the kind of inflation shoppers notice.
Read more: The latest news and updates on Trump’s tariffs
Price changes in a few categories are more striking, as the following set of charts reveals. The monthly change in the cost of appliances, sporting goods, and toys is the highest so far this year. Those product categories are dominated by imports. In each of those sectors, price changes were negative just a few months ago, which meant those goods were getting cheaper. That was logical given the elevated inflation in 2022 and 2023, with some prices dropping in 2024 and 2025 as supply and demand rebalanced.
The Trump tariffs could end that rebalancing, pushing prices up all over again. Granted, it’s not happening everywhere yet. The charts above include clothing, footwear, furniture, and tools, sectors that are also dominated by imports. Price changes in June were not out of the ordinary in those categories. But the modest upturn in apparel, footwear, and furniture prices might foretell bigger jumps in coming months.
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On the whole, the Trump tariffs already in place have raised the average tax on imports from 2.5% before Trump took office to around 21%. Trump has threatened additional tariffs if dozens of trade partners don’t make concessions by Aug. 1. Trump sometimes backs down from these threats, but he has still imposed the highest level of import taxes since 1910.
American importers pay those customs duties to the US Treasury when they accept an overseas shipment. Then they try to recoup as much of the added cost as they can from their own customers. Importers stocked up on inventories early in the year, knowing the Trump tariffs were coming. That has likely caused a lag in the time it takes tariffs to flow through to higher retail prices, since pre-tariff stockpiles were higher than normal.
Trump and his supporters have bragged about customs duties that are hitting record levels and could total $300 billion this year — four times the 2024 haul. But that’s hardly free money. Tariffs are taxes paid by American businesses and consumers, and by raising costs, tariffs will slow economic growth and possibly have other unwanted effects.
Economists broadly expect the tariffs to add 1 to 1.5 percentage points to the inflation rate by the end of the year, which could leave it between 3.5% and 4%. Inflation peaked at 9% in 2022 and got as low as 2.3% in April of this year — almost at the Federal Reserve’s target of 2% or so.
If the Fed were confident that inflation would keep falling, it might cut short-term interest rates. But like most of the financial industry, the Fed expects the Trump tariffs to push inflation back up. So it’s sitting on rates since lowering them can make inflation worse by making money cheaper and juicing spending. Trump has lambasted the Fed for holding rates steady, even though his own tariffs are the main reason they’re not cutting.
Inflation data during the next few months will make clear just how much the Trump tariffs are affecting prices. Most of those lines on the charts will probably be moving sharply upward by the fall. Then we’ll find out if lines on charts bother shoppers in stores.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman.
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