June CPI Report: Tariffs Are Finally Hitting US Consumers’ Wallets

Key Takeaways

• Inflation accelerated in June, with the CPI rising 2.7% on an annual basis compared with 2.4% in May.
• Economists say the impact of President Trump’s tariffs was visible in the CPI data, with prices rising for furniture, toys, and appliances.
• Prices for new and used cars fell, helping to offset gains in other areas.
• A July Fed interest rate cut is unlikely, and analysts see roughly 50% odds of a cut in September.

Inflation accelerated slightly in June, as President Donald Trump’s tariffs on trading partners around the globe began to put upward pressure on consumer prices. The effect was most pronounced within durable goods, including furniture, toys, apparel, and appliances.

Overall, the June Consumer Price Index report showed that inflation rose at a 2.7% annual rate in June and 0.3% on a monthly basis, higher than May’s more muted report. Excluding volatile food and energy prices, the inflation rate rose 2.9% on an annual basis and 0.2% in June.

“Today’s report highlights that the impacts from tariffs are taking effect and that higher import prices are being passed on to consumers,” says Morningstar Wealth chief multi-asset strategist Dominic Pappalardo.

But even as consumer prices tick up slightly, Morningstar senior US economist Preston Caldwell notes that for now, “US firms are shouldering most of the tariff burden.” He says that dynamic will likely change in the second half of the year, as companies look to bolster their profits.

Early Impacts of Tariffs on Goods Prices

Prices rose across a broad spectrum of goods in June. Excluding cars, Caldwell says prices in the durables category rose 0.8% for the month and are up 5.8% on an annualized basis over the past three months. That’s the fastest rate since 2022.

That category includes appliances, which saw 1.9% price growth in June, household furnishings and supplies, which rose 1%, apparel, which rose 0.4%, and toys, which rose 1.8%.

Jason Pride, chief of investment strategy and research at Glenmede, says the toy category is an “important bellwether to monitor” because of its quick turnaround time from shipping docks to store shelves. “Prices for toys have consistently accelerated over the last three months, up 0.3%, 1.3%, and 1.8% sequentially, indicating tariffs are starting to have an impact,” he says.

Meanwhile, food prices rose 0.3% for the month.

June CPI Report Key Stats

• CPI rose 0.3% for the month after rising 0.1% in May.
• Core CPI rose 0.2% after rising 0.1% in May.
• CPI increased 2.7% year over year after increasing 2.4% the prior month.
• Core CPI rose 2.9% from year-ago levels after rising 2.8% in May.

Autos an Exception

New and used cars were a major exception to the upward trend in June. Prices for new vehicles fell 0.3% for the month, while prices for used cars and trucks fell 0.7%. “Despite substantial tariffs affecting the auto industry, there’s been no upward pressure on vehicle prices,” Caldwell says.

Russell Price, chief economist at Ameriprise Financial, attributes the downward pressure on auto prices to waning demand. He recently told Morningstar that unusually elevated demand for cars in March and April (before the onset of the tariffs) may have dented consumer appetites for new and used cars this summer.

July Interest Rate Cut Unlikely

Analysts say higher inflation in June means Federal Reserve officials will likely hold interest rates steady in a range of 4.25%-4.50% at their July meeting. Caldwell points out that while the Fed’s preferred measure of inflation remains relatively to close to its 2% target, the impact of tariffs is still uncertain. “The Fed is likely to refrain from judgment on the inflationary impact from tariffs until more time passes,” he explains. That’s especially true while data on economic activity and the labor market remains solid.

“We do see the Fed as likely to move forward with a September cut, however, as further postponement of rate cuts would constitute an effective monetary policy tightening,” Caldwell adds. Bond futures markets see roughly 50% odds of a cut in September, according to the CME FedWatch tool, down from 60% a week ago.