Inflation Remains Elevated as Trump’s Tariffs Take Hold

Tone & Political Bias: Moderately Left-Leaning

Why: Highlights consumer burdens from tariffs and economic risks, framing the policy’s costs more than potential benefits.

Inflation Stays High in July

U.S. consumer prices rose 2.7% in July compared with a year earlier, according to Labor Department data released Tuesday. The annual inflation rate was little changed from June. Higher costs for imported goods — including toys and furniture — pushed prices up. A steep drop in gasoline prices helped offset some of the increase.

Core Inflation Ticks Up

Excluding volatile food and energy prices, the “core” inflation rate rose 3.1% in the 12 months ending in July, up from 2.9% in the prior 12-month period. Economists track core inflation closely as it provides a clearer view of long-term price trends.

Tariffs Driving Price Increases

Since April, President Trump has imposed tariffs of 10% to 30% on nearly all U.S. imports. Average tariff rates now exceed 18% as additional increases took effect this month. Importers have absorbed part of the added costs or secured price reductions from foreign suppliers. But with the federal government collecting tens of billions of dollars a month in tariff revenue, more costs are reaching consumers.

Uncertain Outlook for Consumers

Economists say the full impact of tariffs on household budgets is still unfolding. Prices on a wide range of goods are likely to remain elevated in the coming months. Federal Reserve Governor Chris Waller has said tariffs may cause a one-time jump in prices but are unlikely to fuel ongoing monthly inflation. Federal Reserve Chair Jerome Powell agrees this is a reasonable view but stresses the Fed must remain alert to the risk of inflation persisting.

Fed Policy Response

The Federal Reserve kept interest rates steady at its July meeting. Signs of labor market weakness have led investors to expect the central bank will cut its benchmark interest rate by 0.25 percentage points at its next meeting. Lower rates would aim to support growth but could also influence inflation trends.

Key Numbers at a Glance

• Headline inflation (July, year-over-year): +2.7%

• Core inflation (July, year-over-year): +3.1%

• Tariffs imposed since April: 10%–30% on nearly all imports

• Average tariff rate now: Over 18%