US Wholesale Inflation Steady Despite Trump Tariffs/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ U.S. wholesale prices held steady in June, easing concerns that President Donald Trump’s tariffs would trigger higher inflation. The producer price index showed no change from May and posted its smallest annual gain since September. Analysts warn, however, that new tariffs starting in August could reignite price pressures.
Quick Looks
- U.S. producer prices flat in June
- Annual wholesale inflation rises just 2.3%
- Core producer prices unchanged month-over-month
- Trump’s tariffs show mixed impact on prices
- Steel prices fall despite 50% import tax
- Auto retailers’ margins drop amid tariff pressures
- Economists warn of potential price hikes by autumn
- Wholesale prices influence the Fed’s inflation outlook
Deep Look
U.S. Producer Prices Hold Steady, Keeping Wholesale Inflation in Check Despite Tariff Pressures
WASHINGTON (AP) — Wholesale inflation in the U.S. remained subdued in June, offering relief to consumers and businesses worried about the inflationary effects of President Donald Trump’s expanding tariffs on imported goods.
The Labor Department reported Wednesday that its producer price index (PPI), which tracks prices before they reach consumers, was unchanged in June compared to May, following a 0.3% rise the previous month. Over the past year, wholesale prices climbed 2.3%, the slowest annual increase since September and below economists’ expectations.
Excluding volatile food and energy prices, core producer prices were also flat from May and rose 2.6% from June 2024.
The report comes just a day after data showed consumer prices rose 2.7% over the past year—the fastest pace since February—largely driven by higher costs tied to Trump’s sweeping tariffs on goods like groceries and appliances.
Tariffs’ Mixed Effects on Prices
Though producer and consumer prices often move in similar directions, the relationship isn’t perfect. Economist Bradley Saunders of Capital Economics noted that Trump’s tariffs did push up core wholesale goods prices by 0.3% in June. Furniture prices rose 1% while home electronics increased 0.8%, both heavily reliant on imports.
Yet, despite a hefty 50% tax on imported steel, steel mill prices actually fell 5.5% last month, indicating that broader market dynamics may be offsetting some tariff effects.
Some companies have managed to keep prices stable by tapping into inventory stockpiles purchased before new tariffs took effect. However, Saunders cautioned that those reserves are running thin, and with additional tariffs looming on Japanese and South Korean imports starting Aug. 1, price pressures may soon mount.
“We are not out of the woods yet,” Saunders said.
Auto Sector Absorbing Costs—For Now
The PPI report revealed a 5.4% drop in profit margins for auto retailers, suggesting that dealerships are absorbing some of the costs imposed by Trump’s 25% tariff on certain imported cars and parts. This may explain why new vehicle prices declined in last month’s consumer price data.
“We doubt that auto retailers will continue to absorb the tariffs indefinitely,” noted Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. “But they have room to fall a good deal further after margins surged during the spike in sales as people sought to get ahead of tariffs on imported vehicles.”
Fed Eyes Wholesale Prices for Inflation Clues
Wholesale inflation serves as an early indicator of potential trends in consumer prices. Economists keep a close watch on the PPI because certain components—like health care and financial services costs—feed directly into the Federal Reserve’s preferred inflation gauge, the personal consumption expenditures (PCE) index.
After inflation surged in 2021 as the economy rebounded from pandemic lockdowns, the Fed raised interest rates 11 times during 2022 and 2023. That helped cool price increases, allowing the Fed to cut rates three times last year.
Yet policymakers remain cautious as they assess the inflationary risks posed by Trump’s trade agenda. The president has continued pressuring the Fed to cut rates further, stoking concerns about the central bank’s independence.
For now, June’s steady producer prices signal some respite for the economy, but looming tariffs could determine whether inflation remains in check—or begins climbing once again.
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