Inflation picked up speed in June, climbing to 2.7% over the past 12 months, according to new data from the Labor Department. It's an unmistakable sign that the long-anticipated impact of President Trump's tariff strategy is starting to materialize.

For American consumers, this means higher prices on everyday items that make up a growing share of monthly household spending.

For months, economists warned that sweeping tariffs on imports would eventually push up prices. Now, with retailers running out of pre-tariff inventory and restocking at higher costs, that pressure is beginning to show up in the data and on store shelves.

Prices Are Quietly Creeping Higher

While inflation remains modest by historical standards, the composition of June's increase is telling. Several consumer categories posted notable price jumps:

• Apparel: up 0.4%

• Furniture: up 1%

• Audio and video products: up 1.1%

• Toys: up 1.8%

A 10% tariff on most imported goods is now feeding directly into the cost structure of American retailers. And consumers, unsurprisingly, are picking up the tab.

The inflation uptick follows a short-lived cooling in the spring. The annual rate fell to 2.3% in April, a four-year low. May ticked up to 2.4%. Now, June's 2.7% marks the first inflation report in which tariffs are clearly reflected in core consumer categories.

"This marks the first inflation report where tariffs are beginning to show up materially," said Daniel Hornung, a senior fellow at MIT and former deputy director of the National Economic Council. "But it is unlikely to be the last."

New Round of Tariffs Begins August 1

The June data may be only a preview of what's ahead. Starting August 1, President Trump's next round of tariffs will take effect:

• A 5% hike on Canadian imports (from 25% to 35%)

• A 30% blanket tariff on imports from Mexico and the European Union

The scope is broad, encompassing food, consumer electronics, furniture, apparel, and auto parts. With few exemptions and minimal delay between policy and implementation, this wave is likely to intensify pricing pressure through the second half of 2025.

Inflation is now expected to hit 3% by the end of the year, according to FactSet and The Wall Street Journal. And that's with some of the steepest tariff proposals still on pause.

Tariffs Hit Shelves After Inventory Runs Dry

Trump's tariffs have been a central feature of his trade policy for months. Yet, inflation remained muted until recently for one reason: inventory lag. For months, retailers had been able to rely on pre-tariff inventory still stored in warehouses. But that buffer is thinning. With new shipments now priced under the revised tax structure, pass-through costs are increasingly unavoidable.

Trump's tariff plans were initially framed as strategic leverage. Tools to nudge foreign partners into renegotiating trade terms. However, they are now functioning as broad consumption taxes.

For middle-income Americans, the impact is subtle but compounding.

The Fed Is Watching, But Not Moving... Yet

The Federal Reserve has maintained interest rates between 4.25% and 4.5% since the beginning of the year, with two potential rate cuts still penciled in for late 2025. But the Fed now faces a familiar dilemma: Cut too soon, and inflation could spike. Wait too long, and growth may stall.

The central bank's preferred inflation measure, core inflation, which excludes food and energy, rose 2.9% year-over-year in June. That's well above the Fed's 2% target and enough to keep policymakers in wait-and-see mode through the next meeting.

A rate cut in July is considered unlikely. A September move is possible, but only if inflation stabilizes and the full impact of the August tariff hikes can be assessed.

The Ripple Effect on Everyday Spending

The tariff shock has arrived, and it's working its way through the economy gradually but persistently.

For consumers, this means paying more for basic goods in steady, hard-to-ignore increments. The hikes may appear small on paper, but over time, their cumulative effect adds up.

If you're in the market for durable goods, such as electronics, appliances, and furniture, consider buying them sooner rather than later. And for households already on a tight budget, it is wise to implement a modest cushion for price increases in everyday essentials.

Inflation Incoming. Are We Ready?

The tariffs have officially crossed over from politics to pocketbooks. And if current trends hold, American households will be absorbing more of those costs in the months ahead.

The question is no longer whether tariffs will affect inflation, but how much more consumers can absorb before it really starts to hurt.

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