Annual inflation rate increased by 2.7% in July compared to the same month last year, providing an insight into the price rise trend.
In a recent development, the Consumer Price Index (CPI) has risen 2.7% on an annual basis in July, surpassing economists' forecasts of a 2.8% increase [1]. This inflationary trend is partially attributed to the new round of U.S. tariffs implemented in 2025, which are expected to cause overall consumer prices to rise by about 1.8% in the short run, assuming no Federal Reserve response and full passthrough to consumers [1].
The impact of these tariffs is particularly pronounced in certain categories such as apparel and home furnishings. For instance, shoe prices have risen 39%, while apparel prices have increased by 37% in the short run, with expected long-run increases of 18% and 17% respectively [1]. Appliances are also affected, though specific price impacts in that category are less detailed in the sources.
These tariff-induced price increases are starting to be seen in categories such as apparel, home furnishings, and appliances, according to the latest CPI reading in June [2]. The Bureau of Labor Statistics tracks the impact of tariffs on the CPI data.
The new round of reciprocal tariffs on goods from more than 60 countries and the European Union went into effect on Aug. 7 [3]. While these tariffs have pushed up prices, some mitigating factors have delayed or softened the inflationary impact. Businesses have at times absorbed cost increases temporarily, and consumers or businesses have shifted spending or inventories to manage price hikes [4]. Additionally, global companies sometimes distribute increased costs internationally, lessening price rises in the U.S. [5].
Despite these tariff-induced price increases, inflation for the year has stayed at 3% or lower. However, food prices rose 2.7% on an annual basis last month, and certain everyday items such as eggs, roasted coffee, and ground beef have seen significant cost increases since last July [6].
In a recent analysis, Alan Detmeister, an economist at UBS, expects consumers to start seeing the direct effects of the tariffs this year or into early next year [7]. He believes that these tariff-induced price increases are more likely to be lasting rather than a one-time price level shock that will start coming down early next year.
Mary Cunningham, a reporter for MoneyWatch, has been following this story closely. With a background at "60 Minutes," ourNews.com, and our News 24/7 as part of the News Associate Program, she brings a wealth of experience to her coverage of this complex issue.
In conclusion, the new tariffs are expected to increase inflation noticeably in key categories like apparel, shoes, and home furnishings, with significant direct effects on consumer prices. However, the full inflationary impact depends on Federal Reserve policies and market responses over time.
References:
- Economic Policy Institute
- Federal Reserve Bank of Atlanta
- Office of the United States Trade Representative
- Federal Reserve Bank of St. Louis
- Peterson Institute for International Economics
- Bureau of Labor Statistics
- UBS
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