US inflation rose in June as Trump’s tariffs start to show in prices

Inflation shot up in June as the impacts of Donald Trump’s tariffs slowly started to show in US prices.

Business leaders have said for months that the high, volatile rates of Trump’s tariffs will force companies to raise consumer prices. Prices remained stable in the spring, particularly as many of Trump’s highest tariffs were paused; however, they started increasing in May and have continued to rise in June.

Annual inflation rose to 2.7% in June, up from 2.4% in May, according to the Consumer Price Index (CPI), which tracks the prices of a basket of goods and services each month. Core CPI, which leaves out energy and food prices, ticked up slightly to 2.9%, compared with 2.8% in May.

Inflation remains far below the price peaks seen three years ago, when price increases reached as high as 9%, and even a year ago, when increases were closer to 3%. But tariffs have appeared to halt inflation’s downward path.

According to the Yale Budget Lab, Americans now face an average tariff rate of 18.7% – the highest rate since 1933. That includes 30% tariffs on China, a 50% tariff on steel and aluminum, 25% on auto parts and a universal 10% tariff on all imports.

The levies currently in effect do not include those Trump is threatening to impose on other large US trading partners. Over the weekend, Trump threatened the EU and Mexico with 30% tariffs and Canada with a 35% tariff. Brazil is set to face 50% tariffs as punishment for the trial of Trump ally Jair Bolsonaro, Brazil’s former president, who is facing charges of attempting a coup.

Prices will likely be pushed up much higher should these tariff rates go into effect, but it’s unclear if and when that could happen. Trump initially set negotiation deadlines to 9 July, but pushed it forward to 1 August as the date approached. Trump’s trade advisers have said they aim to end negotiations by Labor Day at the beginning of September.

As prices remain volatile, the Federal Reserve appears unlikely to adjust interest rates anytime soon, despite cutting rates three times in the fall. Fed officials, including the central bank’s chair, Jerome Powell, have said that price increases are expected to continue in the summer, drawing away from the Fed’s 2% inflation target.