Tariffs Under Trump Gradually Push Up Consumer Prices Amid Labor Market Concerns

Tariffs Gradually Elevate Consumer Prices Across Multiple Sectors

The Bureau of Labor Statistics (BLS) released a key inflation report on September 11, 2025, highlighting rising prices for products sensitive to tariffs imposed under the Trump administration. Categories such as apparel, video and audio equipment, motor vehicle parts, and new cars all saw price increases in August, with energy and groceries also registering notable monthly gains.

Specifically, apparel and video/audio products each rose by 0.5%, motor vehicle parts by 0.6%, new cars by 0.3%, energy by 0.7%, and groceries surged 0.6%, marking their largest monthly increase since August 2022. Furniture and bedding prices increased 0.3%, now up 4.7% year-over-year, while tools and hardware jumped 0.8%, reflecting pressures on manufacturing-related goods.

Broader Inflation Trends and Consumer Impact

Excluding food and energy, goods prices rose 0.3% for the month and 1.5% year-over-year, the fastest pace since May 2023, according to Fitch Ratings. Coffee prices notably increased 3.6% monthly and nearly 21% annually. While these rises may appear modest, they contribute to sustained inflation pressures that concern both consumers and policymakers.

Luke Tilley, chief economist at Wilmington Trust, noted, “We’ve already been seeing tariffs in the data for several months. Consumers were not in a really good place to handle the increased prices that are coming from tariffs.” Tilley further explained that consumers’ cautious spending, especially on services, has limited companies’ ability to raise prices further, somewhat muting the tariff impact.

Despite this, inflation remains near 3% for both core and headline measures, well above the Federal Reserve’s 2% target, posing risks to an economy reliant on consumer spending.

Economic and Policy Implications

Heather Long, chief economist at Navy Federal Credit Union, emphasized the strain tariffs place on the middle class: “It’s troubling that so many basic necessities now cost more. Food, gas, clothing and shelter all had big cost jumps in August. And this is only the beginning of the price hikes.” She warns that prices are likely to rise further as additional costs pass through to consumers.

While the Trump administration has maintained that tariffs would not drive inflation higher, economists generally view tariffs as causing temporary price increases rather than sustained inflation. However, the persistence of elevated prices combined with labor market softness introduces a stagflation-like challenge for the Federal Reserve.

Federal Reserve Outlook Amid Inflation and Labor Market Weakness

Federal Reserve officials are scheduled to meet next week to decide on interest rate policy, with the current federal funds rate near 4.3%. Market expectations, as tracked by CME Group’s FedWatch, suggest the Fed will not only cut rates at the upcoming meeting but also at subsequent meetings through 2026, pricing in roughly six quarter-point reductions—exceeding the four cuts projected by the Fed in June.

Tilley commented, “The somewhat minor pressure that we’re getting from tariffs on the goods side really is being outweighed by the slowdown in the economy, the slowdown in the labor market, the slowdown in consumer spending.” Recent labor data indicate rising initial unemployment claims and minimal job growth this year, factors likely to influence the Fed’s decision to lower rates.

As inflation pressures from tariffs persist, the Federal Reserve faces the complex task of balancing inflation control with supporting an economy showing signs of deceleration.