U.S. inflation accelerated in June as Trump’s tariffs start to bite

Worsening inflation poses a political challenge for Trump, who, as a candidate, promised to immediately lower costs but instead has engaged in a whipsawed frenzy of tariffs that have jolted businesses and consumers. Trump insists the U.S. effectively has no inflation, as he continues pressuring Federal Reserve chair Jerome Powell to cut short-term interest rates.

Still, the latest inflation numbers make it more likely the central bank will leave rates unchanged. Powell has said he wants to gauge the economic impact of Trump’s tariffs before reducing borrowing costs.

Excluding volatile food and energy, core inflation increased 2.9% in June from a year earlier, up from 2.8% in May. On a monthly basis, it picked up 0.2% from May to June. Economists closely watch core prices because they typically provide a better sense of where inflation is headed.

The uptick in inflation was driven by a range of higher prices. The cost of gasoline rose 1% from May to June, while grocery prices increased 0.3%. Appliance prices jumped for the third straight month. Toys, clothing, audio equipment, shoes and sporting goods all became more expensive — and are all heavily imported.

“You are starting to see scattered bits of the tariff inflation regime filter in,” said Eric Winograd, chief economist at asset management firm AllianceBernstein. He added that the cost of long-lasting goods rose last month, compared with a year ago, for the first time in about three years.

Winograd also noted that housing costs — a major inflation driver since the pandemic — have continued to cool, helping restrain broader inflation. The cost of rent rose 3.8% in June compared with a year ago, the smallest yearly increase since late 2021.

“Were it not for the tariff uncertainty, the Fed would already be cutting rates,” Winograd said. “The question is whether there is more to come, and the Fed clearly thinks there is,” along with most economists.

Some items became cheaper last month, including new and used cars, hotel rooms and air fares. Travel prices have generally declined in recent months as fewer international tourists visit the U.S.

A broader political battle over Trump’s tariffs is emerging — a fight that will ultimately be shaped by how the U.S. public feels about their cost of living and whether the president is making good on his 2024 promise to help the middle class.

The White House pushed back on claims that the report showed a negative impact from tariffs, noting the cost of new cars fell despite 25% tariffs on autos and 50% tariffs on steel and aluminum. The administration also pointed out that, despite the June increase in apparel prices, clothing remains cheaper than three months ago.

“Consumer Prices LOW,” Trump posted on Truth Social. “Bring down the Fed Rate, NOW!!!”

For Democratic lawmakers, the inflation report confirmed warnings that Trump’s tariffs could reignite inflation. They said Tuesday the situation will likely worsen given the scale of the tariff hikes Trump proposed in letters posted over the past week.

“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,” said Sen. Elizabeth Warren, D-Mass.

Many businesses built up stockpiles of goods this spring and were able to delay price hikes, while others waited to see whether the duties would become permanent.

More now appear to be throwing in the towel and passing costs to consumers. Walmart, the world’s largest retailer, said it raised prices in June. Automaker Mitsubishi said last month it was increasing prices by an average of 2.1% in response to the duties, and Nike has said it would implement “surgical” price hikes.

Powell said last month that companies across the supply chain would try to avoid paying tariffs, but in the end, someone would have to absorb the cost.

“There’s the manufacturer, the exporter, the importer, the retailer and the consumer, and each one of those is going to be trying not to be the one to pay for the tariff,” the Fed chair said. “But together, they will all pay for it together — or maybe one party will pay it all. But that process is very hard to predict, and we haven’t been through a situation like this.”

Trump has imposed sweeping duties of 10% on all imports, plus 30% on goods from China. Last week, he threatened to hit the European Union with a new 30% tariff starting Aug. 1.

He has also threatened to slap 50% duties on Brazil, which would push up the cost of orange juice and coffee. Orange prices jumped 3.5% from May to June and are 3.4% higher than a year ago, the government said Tuesday.

Overall, grocery prices rose 0.3% last month and are up 2.4% from a year earlier. While that is a smaller increase than during the pandemic-era inflation surge, it is slightly higher than the pre-pandemic pace. The Trump administration has also placed a 17% duty on Mexican tomatoes.

Families have cut spending on food as prices rise. Cassidy Grom, 29, her husband and his mother are eating out less and try to stretch grocery store rotisserie chickens as far as possible, using them in salads and the bones for soup.

“It feels like a miracle if I’m able to leave the grocery store without spending $100,” said Grom, who lives in Edison, N.J. “We’re trying to save for a house, we’re trying to save for a family, so prices are really on our mind.”

The rise in inflation could provide some political cover for Powell, who has faced intense criticism from the White House over interest rates.

The Fed chair has said tariffs could both raise prices and slow the economy — a difficult combination for the central bank, since higher costs would typically prompt a rate hike, while a weakening economy would argue for rate cuts.