If You Only Read the Headlines, You’d Think Inflation Was Breaking Loose
“U.S. Inflation Accelerated in June as Trump’s Tariffs Pushed Up Prices,” cried the New York Times. “Inflation heats up in June amid fears of Trump trade war effects,” warned Axios. The Washington Post declared that inflation was rising “as tariffs began to lift prices across the economy.”
The data tells a different story.
The Consumer Price Index (CPI) rose just 0.3 percent in June. Core CPI—which excludes food and energy—was up a mild 0.2 percent, ticking up from May’s 0.1 percent increase. Year-over-year, overall inflation stands at 2.7 percent, and core at 2.9 percent—both slightly above the prior month’s levels, but hardly the tariff-induced spiral the headlines promised.
Tariffs May Move Prices, But Inflation Didn’t Move In
Yes, some prices rose—mainly in goods tied to international supply chains. Household furnishings and supplies rose 1.0 percent. Appliance prices climbed 1.9 percent. Computers were up 1.4 percent. Apparel increased 0.4 percent. These are all categories plausibly affected by new tariffs. And they moved up sharply.
But they are also categories that had been disinflating or outright declining until recently. Annual price changes remain muted. Household furnishings are up just 1.7 percent year-over-year. Appliances are up 0.8 percent. Computer prices are actually down 0.3 percent. Apparel prices? Down 0.5 percent. These aren’t numbers that will have American families canceling vacations or stretching paychecks.
More importantly: overall inflation isn’t showing tariff pressure. The increases were narrow and isolated. That’s not a trade-fueled inflation breakout—it’s a relative price reshuffling.
The Great Balancing Act
Used car prices fell 0.7 percent. New vehicles dropped 0.3 percent. Airline fares declined 0.1 percent. Eggs fell off a cliff—down 7.4 percent. Dairy slid 0.3 percent. Snack prices slipped 0.6 percent. Hotel and motel prices plunged 3.6 percent.
You can even see the non-inflationary fingerprint of relative pricing inside categories like apparel. Men’s clothing rose 0.9 percent, but only because of a 4.3 percent spike in sweaters and shirts. Suit prices fell 2.7 percent, and underwear/swimwear declined 0.5 percent. Men’s shoes were up, but children’s shoes were down. Women’s outerwear prices dropped 3.3 percent, while dresses and underwear nudged upward. Tariffs hit the whole category, but prices didn’t move in lockstep.
This is what happens when trade policy nudges costs in one part of the supply chain: merchants strategically raise prices where they can, cut them where they must. That’s not broad inflation—it’s microeconomic adaptation.
Even the service sector played nice. Shelter costs—the CPI’s heavyweight—rose just 0.2 percent. Motor vehicle insurance, long a core inflation headache, barely budged—up 0.1 percent.
So, yes, tariffs may have nudged some prices. But that’s not the same thing as “lifting prices across the economy,” no matter how many editors at the Washington Post approve the phrase. Most of Trump’s tariffs aren’t designed to raise prices. They’re meant to shift supply chains, boost domestic production, and secure better trade terms. Where prices did rise, they were offset by declines elsewhere.
Consumers saw cheaper cars, cheaper plane tickets, cheaper groceries, cheaper kids’ clothes. The CPI basket balanced itself.
And for those citing the 2.7 percent year-over-year increase as proof of overheating, a reminder: base effects are doing some of that work. Inflation was unusually soft in June 2024—just 2.4 percent—making this year’s reading look steeper than it really is. Stack a normal month on top of a weak one, and the year-over-year figure jumps—even if the monthly trend remains mild.
The Fed Will Stay On Hold
What does all this mean for the Fed?
Probably nothing in July. The modest pickup in headline and core CPI gives Powell cover to sit tight. There’s no urgent inflation problem, and the soft labor market means there’s no wage pressure forcing the Fed’s hand. Powell can wait, and he likely will.
Come September, things get more interesting. By then, the Fed will have CPI data for July and August, plus two more jobs reports. If inflation stays calm and the labor market keeps loosening, the case for a rate cut will look stronger.
As the Wall Street Journal put it, the June data gave both camps inside the Fed something to hold onto. Hawks can point to tariff-exposed categories where prices rose. Doves can point to the overall picture—muted, balanced, and far from alarming. Powell has recently signaled a lower bar for cuts than he did back in the spring. That’s still the operative mood.
June’s CPI showed what tariffs can do and what they haven’t done. They’ve jiggled a few prices. They haven’t unmoored the economy. Consumers barely noticed. The market stayed calm. And the Fed just got another reason to keep its powder dry.
If this is what the media calls inflationary, it might be time to recalibrate their thermometers.
