Are tariffs to blame for rising inflation? Experts weigh in
Price increases accelerated in June, government data this week showed.
Commonly imported products like clothes, furniture and bed linens were among the goods that jumped in price last month as President Donald Trump's tariffs took hold, federal government data this week showed.
The price of toys -- a product dependent almost entirely on imports -- increased six times faster in June than it had just two months prior.
The U.S. economy so far has defied analysts' fears of a large, tariff-induced price spike. Still, the new data rekindled a longstanding question: Have tariffs begun to push up consumer prices?
Tariffs contributed modestly to the rise of inflation last month, analysts told ABC News, citing the price hikes in product categories made up primarily of imports. But, they added, overall price increases owed largely to a rise in housing and food products with little connection to tariffs.
The prospect of continued price pressures as well as another round of levies set to take effect on Aug. 1 could amplify the tariff impact over the coming months, though the path remains unclear amid Trump's fluctuating policy, analysts said.
"We're seeing the opening stages of these tariff effects taking place," Jason Miller, a professor of supply chain management at Michigan State University, told ABC News.
Consumer prices rose 2.7% in June compared to a year ago, matching economists' expectations but marking an uptick from a month earlier. Still, the inflation rate clocked in below the 3% recorded in January, the month Trump took office.
Despite the rise, Trump appeared to celebrate the data on Tuesday. The president issued a social media post highlighting "Very Low Inflation" and calling on the Federal Reserve to cut interest rates by 3 percentage points.
The White House also touted the inflation reading, saying the rate of price increases demonstrates inflation is "on the right track." Core inflation -- a measure of inflation that strips out volatile food and energy prices -- has matched or beaten economists' expectations every month since Trump took office, the White House said.
Some price increases last month appeared to reflect the impact of tariffs, analysts said, noting that importers typically pass along a share of the tax burden in the form of price hikes.
The price of linens – a predominantly imported product – rose 5.5% in June, far outpacing the overall monthly price increase of 0.3%. Major appliances, another category made up primarily of imports, surged 1.9%. Apparel prices also exceeded the overall pace of inflation last month.
"These are things where profit margins are slim so it's much more difficult for companies to absorb the tariff," Dominic Pappalardo, chief multi-asset strategist at Morningstar Wealth, told ABC News. "They don't have the cushion."
Coffee -- an item almost entirely made up of imports -- jumped 2.2% in price last month, a pace of inflation roughly 7 times the overall inflation rate.
In addition to tariff headwinds, coffee is suffering from a dearth of supply due to drought, meaning too many dollars are chasing after too few coffee beans.
In all, consumers currently face an effective tariff rate of 20.6%, the highest since 1910, the Yale Budget Lab found this week. The price effects of the tariffs amount to an estimated additional $2,800 in costs for the average household over the course of this year, the group said.
Even amid possible glimmers of a tariff impact, overall inflation still results predominantly from other factors, especially a hike in food and housing costs, some analysts said.
"Food and shelter are generally more domestically produced," Pappalardo said. "The effect of tariffs wasn't all that significant."
In recent days, Trump announced he planned to slap tariffs as high as 50% on dozens of countries, including 25% tariffs on top U.S. trade partners such as Japan and South Korea. The fresh levies are set to take effect on Aug. 1. In addition, a proposed 50% tariff on copper imports could intensify the impact of the country-specific levies.
Price hikes could escalate in the coming months due to a combination of additional tariffs and a waning capacity for importers to swallow the cost of levies, some analysts said.
By contrast, a potential tariff-induced economic slowdown could slash consumer demand and mitigate the pressures pushing upward on prices, Callie Cox, chief market strategist at Ritholtz Wealth Management, said in a memo to clients shared with ABC News.
For now, however, those prices remain, Cox added. "Curious minds may start wandering down the rabbit hole of how far inflation could go," Cox said.
