July inflation stayed at 2.7% thanks to falling gas prices, but Trump’s tariffs are quietly raising costs for goods like tools, furniture, and footwear. Here’s how it could hit your wallet.

Inflation Holds Steady, But Trump’s Tariffs Are Boosting Some Prices

Washington, D.C. — Inflation in July remained unchanged at 2.7% year-over-year, offering relief to consumers weary of high prices. But beneath the surface, a different story is emerging: President Donald Trump’s sweeping tariffs are beginning to push up the cost of certain goods — from toys and footwear to tools and home furnishings — in a slow but steady wave that could squeeze American households in the months ahead.

According to the latest Consumer Price Index (CPI) report released Tuesday by the Bureau of Labor Statistics (BLS), overall prices rose 0.2% in July, matching economists’ forecasts. The relatively tame reading was driven largely by a 9.5% drop in gas prices from a year earlier.

But while energy costs cooled, core inflation — which strips out volatile food and energy prices — rose 0.3% from June, its fastest monthly pace since January. That brought the core CPI annual rate to 3.1%, the highest in five months.

Tariffs and the Price Puzzle

The stability in headline inflation masked a more complex reality: the tariffs introduced by the Trump administration on a wide range of imported goods are starting to bite.

Economists had anticipated that higher tariffs would push July inflation up to 2.8%, citing pressure on toys, home furnishings, appliances, and tools. While the headline number came in slightly cooler, the core goods category rose 0.2% for the second month in a row, showing that tariff-exposed items are indeed climbing in price.

Gus Faucher, senior vice president and chief economist at PNC Financial Services Group, warned that consumers should brace for higher prices at everyday retailers like grocery stores and Amazon.

“Consumers are going to start to feel a little more stretched over the next few months as we see more of the impact of tariffs passed through from businesses to consumers,” Faucher told CNN.

What’s Getting More Expensive? A Breakdown of Tariff-Exposed Goods

The CPI data offers a closer look at where tariffs are hitting the hardest:

1. Footwear

• Prices jumped 1.4% in July — the steepest monthly increase in over four years — after rising 0.7% in June.
• Most shoes sold in the U.S. come from China and Vietnam, both facing tariffs above 20%.

2. Furniture and Bedding

• Prices rose 0.9% in July after a 0.4% increase in June.
• The category is heavily dependent on imported wood products and textiles.

3. Outdoor Equipment and Supplies

• Jumped 2.2% in July — the largest increase in over two years — reversing a slight decline in June.

4. Tools, Hardware, and Supplies

• Up 1.2% in July, matching the increases seen since April after a long stretch of falling prices in 2023–2024.

5. Toys

• Rose 0.2% in July, following sharp increases of 1.3% in May and 1.8% in June.
• Hasbro’s CEO has already warned of more hikes ahead, given China’s dominance in toy manufacturing.

6. Textiles, Windows, and Floor Coverings

• Prices rose 1.2% in July after a record 4.2% spike in June.
• The U.S. textile industry’s reliance on imports makes this sector particularly sensitive to tariffs.

Why Prices Aren’t Rising Faster — Yet

Economists point to several reasons why tariff-related inflation has been more of a slow burn than a sudden spike:

• Pre-tariff stockpiling: Many retailers loaded up on goods before tariffs kicked in.
• Cost-sharing in the supply chain: Importers, wholesalers, and retailers have been absorbing part of the tariff cost to maintain sales.
• Phased implementation: Trump’s tariffs have been introduced in waves, delaying full impact.

Still, this cushion won’t last forever. Oliver Allen, senior U.S. economist at Pantheon Macroeconomics, cautioned:

“The pre-tariff stockpiling has mitigated some of the price increases thus far; however, it can’t happen indefinitely.”

Services Inflation Still Driving CPI

Even as tariffs push certain goods higher, services inflation remains the bigger culprit in overall price increases.

• The shelter category, which includes rent and other housing costs, rose 0.2% in July and is up 3.7% from last year — the lowest annual rate since October 2021, but still a significant driver of inflation.
• Other service categories, from healthcare to insurance, also posted gains.

Markets React Positively — For Now

Wall Street shrugged off the tariff-related price pressures, focusing instead on the cooling headline inflation:

• Dow Jones Industrial Average: +480 points (+1.09%)
• S&P 500: +0.73%
• Nasdaq Composite: +0.72%

Investors appear optimistic that the Federal Reserve might respond to slowing headline inflation with a rate cut in September, especially given signs of a softening labor market.

The Federal Reserve at a Crossroads

The July CPI data alone may not force the Fed’s hand, but the combination of modest inflation and weaker job growth could prompt a policy shift.

Michael Hanson, senior global economist at JPMorgan Securities, wrote:

“Today’s report does not pressure the Fed away from a likely insurance cut at its next meeting given concerns about a weakening labor market.”

The August 1 jobs report showed a modest gain of 73,000 jobs in July, with significant downward revisions to prior months — fueling speculation that the U.S. economy is losing momentum.

Political Pressure on the BLS

Beyond the numbers, the CPI release comes amid political turmoil at the Bureau of Labor Statistics.
President Trump recently fired BLS Commissioner Erika McEntarfer, accusing her — without evidence — of manipulating data. The move drew swift criticism from economists and former BLS officials.

Budget and staffing cuts at the BLS under the Department of Government Efficiency have also sparked concerns about the reliability and volatility of monthly inflation data.

What This Means for Consumers

The bottom line: While overall inflation remains manageable, tariffs are already nudging prices higher for a growing list of everyday products.

• Expect more noticeable increases in holiday shopping seasons as pre-tariff inventory runs out.
• Big-ticket items like furniture, appliances, and sporting goods may be worth buying sooner rather than later.
• Footwear and clothing could see continued price hikes as retailers restock from higher-tariff countries.

FAQs

Q: Why hasn’t inflation spiked despite tariffs?
A: Pre-tariff stockpiling, cost absorption in the supply chain, and phased implementation have delayed the full impact.

Q: Will prices keep rising?
A: Yes, but likely gradually — with sharper increases in the coming months as old inventory runs out.

Q: How do tariffs cause inflation?
A: Tariffs raise the cost of imports, which businesses often pass along to consumers.

Q: Could the Fed cut rates?
A: Possibly, if inflation stays subdued and job growth remains weak.