Economic inflation persists at high levels, anchored by Trump's import tariffs
In August 2025, President Trump announced plans to impose tariffs on imported furniture, set to take effect within about 50 days. This move has raised concerns about its potential impact on the cost of living and inflation in the U.S.
The tariffs are expected to increase the cost of imported furniture by adding to the import expenses of retailers, who often pass these costs onto consumers. As a result, home furnishings prices have risen, contributing to overall cost of living increases. However, the extent to which these tariffs have driven inflation remains a topic of debate.
Analyses of Trump's earlier tariff implementations suggest that while they did raise prices in targeted sectors, their overall effect on broad U.S. inflation was limited or moderate. Other factors, such as supply chain issues, labor costs, and energy prices, also play significant roles in cost of living increases.
Meanwhile, signs of weakness in the labor market have emerged, and Fed Chairman Jerome Powell has expressed concern about the risk that inflation might prove more persistent. The average tariff rate on imported goods in the U.S. has increased to 18%, and the price of home furnishings rose in July.
The rise in consumer prices in July was partially due to higher costs on imported items such as toys and furniture. For the 12 months ending in July, "core" inflation was 3.1%, a slight increase from the 12 months ending in June (2.9%).
The Federal Reserve held interest rates steady at its last policy meeting in July, but investors are betting that the Fed will lower its benchmark rate by a quarter-percentage point when policymakers meet next month.
A report on the cost of living was released on Tuesday by the Labor Department, revealing that the overall cost of living rose 2.7% from a year ago. The price of gasoline dropped sharply in July, which may have offset some of the inflationary pressures caused by the tariffs.
Notably, the U.S. and China extended their tariff truce deadline for another 3 months, which might have some impact on the cost of living and inflation in the coming months. However, there is no specific mention of a relationship between the tariff truce extension and the increase in consumer prices in July.
Fed Governor Chris Waller believes that tariffs will cause a one-time jump in prices but will not continue to fuel inflation. As the impact of Trump's furniture tariffs unfolds, consumers are expected to see higher prices due to the increased cost of imported home furnishings.
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