WASHINGTON (AP) — U.S. inflation was unchanged last month while a measure of underlying inflation rose to its highest level in five months, as tariffs have raised the cost of some imported goods while gas and procery prices cooled.
Consumer prices rose 2.7% in July from a year earlier, the Labor Department said Tuesday, the same as the previous month and up from a post-pandemic low of 2.3% in April. Excluding the volatile food and energy categories, core prices rose 3.1%, up from 2.9% in June.
The figures suggest that slowing cost growth for rents and cheaper gas are offsetting some of the impact of President Donald Trump’s sweeping tariffs. Tuesday’s figures likely reflect the 10% universal tariff Trump imposed in April, as well as higher duties on countries such as China and Canada.
“E.J. will ensure that the Numbers released are HONEST and ACCURATE,” Trump said on Truth Social.
On a monthly basis, prices are expected to rise modestly, increasing just 0.2% from June to July and core prices rising 0.3%. Gas prices likely fell in July and grocery costs are expected to barely increase, muting overall inflation.
Meanwhile, the average tariff level has climbed from about 2% before Trump’s inauguration to nearly 18%, the highest since the early 1930s, according to the Budget Lab at Yale. Most imports from the European Union and Japan now face duties of 15%, while goods from Taiwan pay 20% and Switzerland, 39%.
Other trends are helping keep inflation from rising more quickly. Price increases for apartment rents, for example, are steadily cooling after sharp spikes during the pandemic era. And prices for new cars have declined slightly in recent months, even after Trump slapped 25% duties on autos and auto parts.
So far, U.S. and overseas carmakers are paying the tariffs, though economists say they likely will pass them on to consumers soon. Car companies are also paying 50% import taxes on steel and aluminum and 30% on parts from China.
Consumers are likely to absorb more costs beyond the auto industry in the coming months, as Trump has begun to finalize many tariffs. Once businesses know what they will be paying, they are more likely to pass those costs to consumers, economists say.
Trump has insisted that overseas manufacturers will pay the tariffs by reducing their prices to offset the duties. Yet the pre-tariff prices of imports haven’t fallen much since the levies were put in place.
Economists at Goldman Sachs estimate that foreign manufacturers have absorbed just 14% of the duties through June, while 22% has been paid by consumers and 64% by U.S. companies. Based on previous patterns, however — such as Trump’s 2018 duties on washing machines — the economists expect that by this fall consumers will bear 67% of the burden, while foreign exporters pay 25% and U.S. companies handle just 8%.
And cosmetics maker e.l.f. Beauty, which makes a majority of its products in China, said on Wednesday that it had raised prices by a dollar on its entire product assortment as of Aug. 1 because of tariff costs, the third price hike in its 21-year history.
“We tend to lead and then we will see how many more kind of follow us,” CEO Tarang Amin said on an earnings call Wednesday.
Matt Pavich, CEO of Revionics, a company that provides AI tools to large retailers to help them evaluate pricing decisions, says many companies are raising prices selectively to offset tariffs, rather than across the board.
“Up until now we haven’t seen a massive hit to consumers in retail prices,” Pavich said. “Now, they are going up, we’ve seen that.”
