Indeed, in the United States inflation jumped to 2.4% this past May. That’s up from 2.3% in April, according to the Labor Department. This recent surge in inflation has caused a great deal of alarm. Shockingly, Donald Trump’s first round of tariff increases has had a much more limited impact on American consumers to date. These circumstances highlight a complicated landscape where the economy looks very different depending on where prices are today.
The Labor Department’s Consumer Price Index release showed that total prices increased by 0.1% from April to May. This comes on the heels of a March-April increase of just 0.2%. Particularly alarming, prices for toys, car parts and major appliances all posted record increases last month. This spike in appliance costs comes at an important time considering the U.S. has become heavily dependent on China as a source for their supply.
On a year-over-year basis, rental and owner-occupied costs surged 3.6% from May 2023. This jump stokes the inflation narrative even more. Grocery prices rose 2.2% in September, putting even more strain on households.
With all these increases, Trump continues to claim that foreign companies will pay the price for his tariffs. Perhaps most audaciously, he claims that American households will not feel the impact. This past Friday, he pushed back against catastrophic forecasts that claimed his administration’s trade policies would harm American consumers.
Seema Shah, chief global strategist at Principal Asset Management explained what we might be seeing in an uncharacteristic inflationary flash.
“Today’s below forecast inflation print is reassuring – but only to an extent,” – Seema Shah.
She cautioned that the impact of these tariff-driven price increases may not even be fully reflected in the Consumer Price Index (CPI) data so far. The full effect is still playing out.
“Tariff-driven price increases may not feed through to the CPI data for a few more months yet, so it is far too premature to assume that the price shock will not materialise,” – Seema Shah.
With inflation deepening the crisis, the impacts of these economic changes are still unclear. Consumer price reports further underscore the continuing volatility of today’s markets. They show that the relationship is not that simple when it comes to tariffs and inflationary pressures.