Kiplinger Inflation Outlook: Tariffs Affecting Goods Prices

last updated 16 July 2025

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Tariffs pushed up prices of some goods in June’s inflation report, but so far have had only a modest effect on overall inflation. In June, prices of some consumer goods that are typically imported jumped. These included appliances, up 1.9%; cookware/tableware, 3.7%; linens, 5.5%; sports equipment, 1.8%; toys, 1.8%; audio/video equipment, 3.4%; men’s shirts, 4.3%; and women’s dresses, 3.9%.

However, other categories have not shown a price bump yet, including other apparel, motor vehicles and televisions. It seems likely that tariff costs will become more noticeable in prices as pre-tariff inventories of imported goods are drawn down throughout the summer. However, it is possible that some businesses may opt to cut their profit margins rather than lose market share.

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The price increases from tariffs have not been enough, yet, to push the yearly inflation rate upward very much. Overall yearly inflation picked up to 2.7%, from 2.4% in May, but the core inflation rate (excluding food and energy) edged up only slightly, to 2.9% from 2.8%. Food and energy costs rose moderately, but this was nothing out of the ordinary. One piece of good news for consumers is that egg prices dropped 7.4% in June, their third consecutive decline, and are 21% lower than their February peak.

The uncertainty about the size of tariff effects on prices will likely keep the Federal Reserve on hold at its next policy meeting on July 30. The Fed will want to see the effects of tariffs on inflation over the next several months before acting. Since tariff effects on consumer prices will happen only gradually, the Fed is likely to wait a number of months in order to assess the longer-term impact.

While the headlines focus on the Consumer Price Index, note that the Fed’s goal of 2% inflation is based on a measure called the personal consumption expenditures deflator, not the CPI. The PCE deflator excluding food and energy rose at a 2.7% rate for the 12 months ending in May, compared with the core CPI’s 2.8% May number. Still, that’s well above the Fed’s target for 2% inflation over the long term.

David is both staff economist and reporter for The Kiplinger Letter, overseeing Kiplinger forecasts for the U.S. and world economies. Previously, he was senior principal economist in the Center for Forecasting and Modeling at IHS/GlobalInsight, and an economist in the Chief Economist's Office of the U.S. Department of Commerce. David has co-written weekly reports on economic conditions since 1992, and has forecasted GDP and its components since 1995, beating the Blue Chip Indicators forecasts two-thirds of the time. David is a Certified Business Economist as recognized by the National Association for Business Economics. He has two master's degrees and is ABD in economics from the University of North Carolina at Chapel Hill.