Inflation is staying level—for now—but the next wave of tariff-driven price increases is already in motion: ‘They are going up, we’ve seen that’
Key Takeaways
The data arrives at a highly-charged moment for the Labor Department's Bureau of Labor Statistics, as Trump picked E.J. Antoni to replace Erika McEntarfer.
Article Overview
Quick insights and key information
6 min read
Estimated completion
personal finance
Article classification
August 12, 2025
12:57 PM
Fortune
Original publisher
Economy·InflationInflation is staying level—for now—but the next wave of tariff-driven price increases is already in motion: ‘They are going up, we’ve seen that’By Christopher RugaberBy The Associated PressBy Christopher RugaberBy The Associated Press Federal Reserve Chairman Jerome Powell, speaks during a news conference ing the Federal Open Market Committee meeting, Wednesday, July 30, 2025, in Washington.Manuel Balce Ceneta—AP PhotoWASHINGTON (AP) — U.S. inflation was unchanged last month while a measure of underlying inflation rose to its highest level in five months, as tariffs have raised the cost of some imported goods while gas and cery prices cooled
Consumer prices rose 2.7% in July from a year earlier, the Labor Department said Tuesday, the same as the previous month and up from a post-pandemic low of 2.3% in April
Excluding the volatile food and energy , core prices rose 3.1%, up from 2.9% in June
The figures suggest that slowing cost growth for rents and cheaper gas are offsetting some of the impact of President Donald Trump’s sweeping tariffs
Tuesday’s figures ly reflect the 10% universal tariff Trump imposed in April, as well as higher duties on countries such as China and Canada
Still, stubbornly high inflation puts the Federal Reserve in a difficult spot: Hiring slowed sharply in the spring, after Trump announced tariffs in April
The stalling out of job gains has boosted financial market expectations for an interest rate cut by the central bank
Yet Fed chair Jerome Powell has warned that worsening inflation could keep the Fed on the sidelines — a stance that has enraged Trump, who has defied traditional norms of central bank independence and demanded lower borrowing costs
Tuesday’s data arrives at a highly-charged moment for the Labor Department’s Bureau of Labor Statistics, which collects and publishes the inflation data
Trump fired Erika McEntarfer, then the head of BLS, after the Aug. 1 jobs report also showed sharply lower hiring for May and June than had previously been reported
The president posted on social media Monday that he has picked E.J
Antoni, an economist at the conservative Heritage Foundation and a frequent critic of the jobs report, to replace McEntarfer. “E.J. will ensure that the Numbers released are HONEST and ACCURATE,” Trump said on Truth Social
Adding to the BLS’s turmoil is a government-wide hiring freeze that has forced it to cut back on the amount of data it collects for each inflation report, the agency has said
UBS economist Alan Detmeister estimates that BLS is now collecting 18% fewer price quotes for the inflation report than it did a few months ago
He thinks the report will duce more volatile results, though averaged out over time, still reliable
On a monthly basis, prices are expected to rise modestly, increasing just 0.2% from June to July and core prices rising 0.3%
Gas prices ly fell in July and grocery costs are expected to barely increase, muting overall inflation
Signs of duties pushing up prices first emerged in the June inflation report released last month
Toy prices jumped 1.8% from May to June, after a 1.3% increase the previous month
Clothing prices rose 0.4% in June, while sporting goods leapt 1.8%
Meanwhile, the average tariff level has climbed from 2% before Trump’s inauguration to nearly 18%, the highest since the early 1930s, according to the Budget Lab at Yale
Most imports from the European Union and Japan now face duties of 15%, while goods from Taiwan pay 20% and Switzerland, 39%
Other trends are helping keep inflation from rising more quickly
Price increases for apartment rents, for example, are steadily cooling after sharp spikes during the pandemic era
And prices for new cars have declined slightly in recent months, even after Trump slapped 25% duties on autos and auto parts
So far, U.S. and overseas carmakers are paying the tariffs, though economists say they ly will pass them on to consumers soon
Car companies are also paying 50% import taxes on steel and aluminum and 30% on parts from China
Ford has said it paid $800 million in tariffs in the second quarter, while General Motors shouldered $1.1 billion
Stellantis, the world’s fourth-largest carmaker and the maker of brands such as Chrysler, Dodge, and Jeep, has said it has paid $350 million in tariffs out of a $1.7 billion expected cost this year
Consumers are ly to absorb more costs beyond the auto industry in the coming months, as Trump has begun to finalize many tariffs
Once es know what they will be paying, they are more ly to pass those costs to consumers, economists say
Trump has insisted that overseas manufacturers will pay the tariffs by reducing their prices to offset the duties
Yet the pre-tariff prices of imports haven’t fallen much since the levies were put in place
Economists at Goldman Sachs estimate that foreign manufacturers have absorbed just 14% of the duties through June, while 22% has been paid by consumers and 64% by U.S. companies
Based on previous patterns, however — such as Trump’s 2018 duties on washing machines — the economists expect that by this fall consumers will bear 67% of the burden, while foreign exporters pay 25% and U.S. companies handle just 8%
Many large firms are still raising prices in response to the tariffs, including apparel makers Ralph Lauren and Under Armour, and eyewear company Warby Parker
Consumer ducts giant cter & Gamble, maker of Crest toothpaste, Tide detergent and Charmin toilet paper, said late last month that it would lift prices on a quarter of its ducts by mid-single-digit percentages
And cosmetics maker e.l.f
Beauty, which makes a majority of its ducts in China, said on Wednesday that it had raised prices by a dollar on its entire duct asment as of Aug. 1 because of tariff costs, the third price hike in its 21-year history. “We tend to lead and then we will see how many more kind of us,” CEO Tarang Amin said on an earnings call Wednesday
Matt Pavich, CEO of Revionics, a company that vides AI tools to large retailers to help them evaluate pricing decisions, says many companies are raising prices selectively to offset tariffs, rather than across the board. “Up until now we haven’t seen a massive hit to consumers in retail prices,” Pavich said. “Now, they are going up, we’ve seen that.” Introducing the 2025 Fortune Global 500, the definitive ranking of the biggest companies in the world
Explore this year's list.
Related Articles
More insights from FinancialBooklet