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US consumers feeling pinch of rising inflation amid Trump tariffs

  • By Al Mayadeen English
  • Source: Agencies + Al Mayadeen English
  • 31 Jul 2025 21:14
4 Min Read

US inflation has surged to 2.6% annually in June 2025, driven by Trump administration tariffs that pushed import duties to Great Depression-era levels.

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  • Trump's tariffs start hurting US consumers
    The seal of the Federal Reserve Board of Governors at the Fed, on July 30, 2025, in Washington, DC (GETTY IMAGES NORTH AMERICA / Getty Images via AFP)

US inflation rose faster than expected in June 2025, primarily due to tariffs imposed by the Trump administration on imported goods. The Personal Consumption Expenditures (PCE) price index, a key economic indicator to gauge inflation, increased by 0.3% for the month, bringing the annual rate to 2.6%, up from 2.4% in May.

Core inflation, which excludes volatile food and energy prices, also rose by 0.3% month-over-month and held steady at 2.8% year-over-year, well above the Federal Reserve's 2% target.

The surge marks a significant shift from the stable inflation observed from 2014 to 2017, when rates stayed near or below the Fed's target. During Trump's first presidency (2017–2021), the average annual inflation was a modest 2.46%. However, the second Trump presidency has seen a dramatic rise in tariffs, from 2.5% in January 2025 to 17.3%-22.7% by mid-2025. The average applied tariff rate reached an estimated 27%, the highest since the Great Depression.

These tariffs have pushed up the prices of furniture, household equipment (+1.3%), recreation goods and vehicles (+0.9%), and clothing and footwear (+0.4%). According to the Tax Foundation, the 2025 tariffs amount to an average tax increase of nearly $1,300 per US household.

The Trump tariffs are projected to raise the cost of food for consumers, particularly for liqueurs and spirits, baked goods, coffee, fish, and beer. pic.twitter.com/9pyJ7NQiqW

— Tax Foundation (@TaxFoundation) July 31, 2025

Federal Reserve responds

Despite earlier market expectations, the Federal Reserve held interest rates steady at 4.25%-4.50% during its July meeting. Fed Chair Jerome Powell indicated that a rate cut is unlikely before October, reflecting concerns over persistent inflationary pressures.

Financial institutions had forecasted this inflationary trend. For example, Goldman Sachs projected core goods inflation could reach 6.3% in 2025, while JPMorgan expected core inflation to nearly double by year-end. The Yale Budget Lab estimated a 2.3% short-term price increase due to tariffs, and Morgan Stanley revised its forecast from 2.3% to 2.5%.

Read Chair Powell's full opening statement from the #FOMC press conference (PDF):  https://t.co/2u8x0hnP1f pic.twitter.com/Cz8udPxrb5

— Federal Reserve (@federalreserve) July 30, 2025

Economic growth amid increasing risk

Despite the rise in inflation, the US economy showed some growth. GDP grew at a 3.0% annualized rate in Q2 2025, rebounding from a 0.5% contraction in Q1. Consumer spending rose 0.3% in June and grew at 1.4% for the quarter.

However, adjusted for inflation, real consumer spending increased only 0.1% in June, highlighting the impact of rising prices on purchasing power. The labor market, while still stable, shows signs of strain. New unemployment claims in July stood at 218,000, with continuing claims at 1.946 million. The unemployment rate is expected to rise to 4.2% in July from 4.1% in June.

Inflation expectations

Looking ahead, most economists anticipate that inflation will intensify in the second half of 2025. Initially, businesses absorbed these costs through existing inventory stockpiles, but they are now being passed on to consumers. Core PCE inflation is projected to rise at a quarterly annualized rate of 4.6% in Q3. Additional tariffs scheduled for August 1 on various countries could further elevate price pressures.

The OECD revised its 2025 US inflation forecast to 4.2%, up from 3.7%, while the IMF expects inflation to remain above the Federal Reserve's target through year-end. These projections suggest that the US may experience sustained inflationary pressures and slowing economic growth in the coming months.

  • US consumers
  • Federal reserve
  • interest rates
  • Trump administration
  • inflation in the US
  • inflation
  • trump tariffs
  • US monetary policy
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