Inflation rises in June, impact of Trump’s tariffs starting to show

San José, CA – On Tuesday, July 15, the Department of Labor reported that prices for consumer goods and services rose at a faster rate for a second month in a row. The Consumer Price Index, or CPI, rose at a 0.3% rate in June, or a 3.7% annual rate. The year-over-year increase, as compared to June 2024, was 2.7%, up from the 2.4% year over year rate in May.

Many economists like to look at the so-called “core” rate which strips out changes in food and energy prices, which can give a better sense where inflation is headed, since food and energy prices bounce up and down a lot. The core rate for the CPI in June on a year-over-year basis was even higher, at 2.9%. This was because the total inflation rate was pulled down by 8.3% year-over-year drop in gasoline prices.

Goods that are mainly or even almost entirely imported showed even faster increases in prices, showing the early impacts of Trump’s historic increase in tariffs. Shoes and other footwear prices rose 0.7% in June, more than twice the average rate of 0.3%. Tire prices were up 0.9%, while toy prices were up by 1.8%. Major appliance prices soared 1.9% in June, or a whopping 25% annual rate of increase.

The impact of climate change-fueled disasters showed in the 1.1% increase in home insurance premiums in June – this is equivalent to a 13% annual rate. The number of natural disasters is becoming more frequent. In 2024 the United States suffered almost $218 billion in losses, of which a bit more than half, or almost $113 billion, were covered by insurance.

The price increases caused by Trump’s trade wars still have a way to go. So far, the impact has been muted by the very large “front-loading” of imports. Imports, which are a deduction from Gross Domestic Product, rose at a record pace in the first three months of the year to avoid Trump’s tariffs. This led to a large increase in unsold goods.

Trump’s historic April 2 tariff increase on almost every country in the was shocking, but then he backed off, with 10% baseline tariffs (except for Canada, China, and Mexico) for 90 days. But his sectoral, or industry-wide tariffs on aluminum and steel (first 25%, then doubled to 50%), automobiles and auto parts, expansion of first term tariffs on washing machines to include refrigerators and dishwashers, stood. Trump also eliminated the tariff free or “de minimus” rule for packages under $800 in value.

In July, Trump sent letters setting higher tariffs of 25-40% to at least a dozen more countries, mainly in Asia. The average U.S. tariff rate rose to almost 18% – the highest rate since the Smoot-Hawley tariffs of the Great Depression of the 1930s.

Finally, Trump is not done with raising tariffs. There is a new tariff on imports of copper – 50% – to go into effect August 1. Trump is raising tariffs on Brazil from 10% to 50% to try to strong-arm them to stop persecuting Brazil’s right-wing former president. Trump has threatened 50% tariffs on goods from the European Union starting August 1.

The Trump administration is also studying new tariffs on digital services, timber and lumber, medical drugs, semiconductors, “critical minerals,” trucks and truck parts, and commercial aircraft and jet engines. He has also threatened steep tariffs on imported solar panels, putting tariffs on dolls, and on foreign-made films.

So, in all likelihood, higher tariffs, and higher prices from tariffs, will continue to at least the end of the year.

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