Inflation’s Rebound: Why Tariffs Might Be the Hidden Trigger

Consumer prices rose 2.7% in June, up from 2.4% in May, as early signs emerged that companies are passing tariff costs to U.S. consumers.

Core inflation (excluding food and energy) hit 2.9%, and monthly headline CPI rose 0.3%—the sharpest monthly gain since January.

Economists remain split: Are these numbers a temporary blip or the start of a tariff-fueled price surge?

Key inflation-sensitive categories, such as toys, clothing, and furniture, posted noticeable jumps, while used car prices actually declined, possibly due to earlier stockpiling ahead of anticipated import taxes.

This inflation print complicates the Fed’s path forward, revives concerns about stagflation, and signals a volatile summer ahead for investors.

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Economic Impacts

The inflation uptick marks a potential inflection point for U.S. price stability.

While 2.7% annual CPI may not scream “crisis,” it breaks the downtrend investors were counting on, and it’s happening just as tariff policies become more aggressive.

President Trump’s latest slate of duties, including 30% levies on Canadian, EU and Mexican goods starting August 1 and a threatened 100% tariff on Russian imports, is starting to seep into goods prices.

Key points:

• Prices for tariff-sensitive goods rose sharply, especially apparel, furniture, and toys.

• Services inflation cooled, suggesting consumer fatigue may be limiting broad-based price hikes.

• A surprise 3.6% drop in hotel prices and a continued slide in airfares signal potential pullbacks in discretionary spending.

• Goldman Sachs estimates consumers will bear 70% of tariff costs, and many companies (e.g., Walmart, Ralph Lauren) have already warned of future price hikes.

If this trend continues, CPI could stay elevated into Q3, especially once current inventories run dry and companies are forced to adjust pricing more broadly.

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Global Policy Watch

Tariff ripple effects are growing more unpredictable.

Trump’s “America First” tariff regime is expanding faster than markets anticipated, with new 30–100% duties announced in the span of a weekend.

This uncertainty makes it harder for central banks and multinational corporations to plan.

• U.S. allies, such as Canada, Mexico, and the EU, may respond with retaliatory tariffs, raising the risk of a full-blown trade war redux.

• Emerging market suppliers are preparing for shifts in demand as U.S. importers adjust their sourcing strategies or delay orders.

• Companies that stocked up ahead of tariffs helped delay price impacts—but that buffer is thinning fast.

Chicago Fed President Austan Goolsbee likened the current macro backdrop to “throwing dirt back in the air,” with unclear inflation trajectories and volatile consumer behavior clouding the Fed’s next move.

Markets are pricing in a possible rate cut by September, but this depends on whether the July and August CPI readings show stabilization or continued acceleration.

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The Main Takeaway

Tariffs are starting to show up in the data.

✅ Price hikes in goods categories tied to imports suggest tariff pass-through is real, though not yet systemic.
❌ Risk of sustained inflation remains if businesses shift from absorbing costs to fully passing them on.
👀 Watch the next two CPI prints closely. If July mirrors June, a September Fed cut becomes far less likely.

Stocks to Watch

Stock to Buy

In a tariff-driven inflationary environment:

• Its Kirkland private-label brand offers cost-saving alternatives.

• Inventory rotation gives Costco flexibility to source around tariffs.

• Inflation can boost nominal sales, even if volumes remain flat.

Though short-term costs may rise, long-term fundamentals remain solid.

With 129.5 million cardholders globally and high renewal rates, Costco offers investors a relative safe haven amid uncertain inflation policy.

CEO Ron Vachris noted in May that “disciplined sourcing and member value” remain Costco’s top priorities, which is an encouraging sign for those seeking defensive retail exposure.