The U.S. economy may appear steady on the surface, with consumer spending strong and the stock market charging ahead. Yet beneath that optimism lurks a hidden danger: tariffs that could weigh heavily on American households. Fresh economic data released last week revealed a mixed picture, with one figure flashing a clear warning sign—core inflation is climbing again.
According to the Bureau of Labor Statistics, the Consumer Price Index rose 2.7% year-over-year in July, while core inflation—excluding food and energy—jumped 3.1%. That marks the sharpest increase in five months, raising concerns that higher costs are once again tightening their grip on consumers.
Consumer Spending Rises but Slows
Retail sales went from a rise of .9% in June to .5% in July, according to an advance report from the U.S. Census Bureau. The slowdown is concerning because consumer spending accounts for approximately 70% of the nation’s Gross Domestic Product (GDP). A nation’s GDP is a measure of the total goods and services it produces.
Car sales posted the greatest increase in sales last month, gaining 1.6%. Furniture sales followed with a 1.4% rise. Online sales also rose 0.8%, spurred by Amazon’s Prime Day sale from July 8 to 11.
Restaurants and bars continued to see a slump in sales. In July, sales for that sector dropped .4%. The decline in May was the worst in two years. Among other categories, sales at home improvement stores and electronics retailers decreased by 1% and 0.6%, respectively.
Companies Face Rising Costs Due to Tariffs
The Producer Price Index (PPI) for July was released on Thursday, showing a 0.9% rise, according to the BLS. That is a 3.3% hike over the last year.
The increased cost of doing business poses a challenge to companies. However, many have been able to avoid passing those rising costs on to consumers—until recently.
More companies have announced or are considering price hikes.
Procter & Gamble announced late last month that it will boost prices on its products by 25% to cover tariffs. Among the products the company makes are Crest, Pampers, Charmin, Gillette, Olay, Tide, and Vicks.
A growing number of consumer goods companies are resorting to price hikes as they grapple with increased costs associated with tariffs.
In May, Walmart announced that tariffs were causing it to raise prices on certain items.
Likewise, German sportswear company Adidas said at the end of last month that it is raising prices due to U.S. tariffs.
Raising Prices
Companies that have raised prices to counter the costs of tariffs include:
CostcoBest BuySharkNinjaNewell BrandsShein TemuHermèsAutoZoneFerrariStanley Black & DeckerDiggsNikonCanonLeica
Planned Price Hikes
Companies reportedly planning to raise prices include:
TargetMacy’s: Will increase some prices or stop carrying some products altogetherMattelRalph LaurenFord Conagra: May hike prices to offset tariffs on ingredients like cocoa, olive oil, and steelVolkswagen: Plans to add an import fee on vehicles made outside the U.S.Subaru Nintendo: Accessories for the Switch 2 console will increase in price, but not for the console itself Birkenstock Zwilling J.A. HenckelsMunchkinAvocado Green MattressRéalisation ParUPPAbaby
Note that the lists above are subject to change as companies evaluate their options.
Goldman Sachs Report
Meanwhile, investment banking firm Goldman Sachs issued a report last week that American consumers, not foreign companies or governments, are shouldering the expense of tariffs. In addition, the report forecasts that those expenses will rise dramatically by this fall.
Goldman reports that businesses have been bearing most of the costs of tariffs. However, the resources to continue doing so are dwindling. As a result, you and I are picking up most of those costs in the form of higher consumer prices.
American shoppers had absorbed 22% of tariff costs as of June, according to the report. Goldman Chief Economist Jan Hatzius projects that by October, that figure will rise to 67%.
President Donald Trump’s reaction to Goldman’s projections was consistent with his response to previous bad economic news. He fired BLS Commissioner Erika McEntarfer a few weeks ago after a poor July Jobs report. In a social media post, he suggested that Goldman CEO David Solomon “should go out and get himself a new Economist”.
Along with higher consumer prices, Goldman is expecting tariffs to fuel inflation. Currently, inflation is trending at 2.4%, noted the report. However, if tariffs remain at current rates, Goldman forecasts a rise to 3.2% by the end of the year.
Consumers Feel Tariff Effect
An Intuit Credit Karma survey last month found that 62% of those polled have experienced price increases in everyday goods as a result of tariffs. Although 67% say it is difficult to determine which price increases are the result of tariffs.
Another 30% of survey participants report not having witnessed price increases resulting from tariffs. However, 53% report that they have changed their spending to counter increased costs from tariffs.
“There are still many unknowns about how tariffs are directly impacting consumers,” said Courtney Alev, consumer financial advocate at Intuit Credit Karma. “The best thing you can do right now is consistently monitor your spending and stick to a monthly budget to build financial resilience against rising prices or unexpected changes in your financial situation. “
Income Divide Distorts Spending Figures
Mirroring the findings of Intuit Credit Karma, a University of Michigan survey released on Friday shows that higher-income earners are fueling consumer spending, while middle- and low-income groups are cutting back.
About a quarter (24%) of survey participants told University of Michigan researchers they planned to continue spending on big-ticket items in the year ahead.
“The remaining consumers report that they would reduce their spending on such items, either by cutting back or stopping their spending on such items altogether,” according to the survey.
More financial pain is ahead for low-income consumers. They spend a larger portion of their incomes on staples and less on discretionary purchases. As a result, tariff-driven price inflation will hit them hardest.
In addition, a recent Congressional Budget Office (CBO) analysis found that the Trump tax and spend law, known as the “One Big Beautiful Bill” (OBBB), will further widen the income divide in America.
“The changes in resources will not be evenly distributed among households,” according to the CBO. “The agency estimates that, in general, resources will decrease for households toward the bottom of the income distribution, whereas resources will increase for households in the middle and toward the top of the income distribution.”
Back-to-School Sacrifices
For parents with school-age children, the stress of tariff-induced price hikes has made back-to-school shopping difficult, according to a July Intuit Credit Karma survey.
Of parents with one or more children attending school this year, 39% can not afford back-to-school shopping, according to the survey. That is up from 31% last year. Another 44% planned to pay for school expenses with debt. That is a 10-point spike from last year.
Over half of parents (54%) said they will cut back on necessities, such as food, to cover school expenses.
Furthermore, 45% said they can not pay for after-school programs. Subsequently, 32% are considering leaving their jobs or cutting back work hours rather than leaving their children unattended.
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Max K. Erkiletian began writing for newspapers while still in high school. He went on to become an award-winning journalist and co-founder of the print magazine Free Bird. He has written for a wide range of regional and national publications as well as many on-line publications. That has afforded him the opportunity to interview a variety of prominent figures from former Chairman of the Federal Reserve Bank Paul Volker to Blues musicians Muddy Waters and B. B. King. Max lives in Springfield, MO with his wife Karen and their cat – Pudge. He spends as much time as possible with his kids, grandchildren, and great-grandchildren.
