U.S. wholesale prices rise in July as Donald Trump tariffs hit

Last month, U.S. producers raised prices as fast as possible in more than three years as companies struggled to deal with new fees for tariffs raised by U.S. President Donald Trump.

According to the Labor Department, the producer price index, which measures the selling price directed by U.S. producers rose 0.9% from June to July after flattening last month.

This is much larger than analysts’ 0.2% forecast, which analysts predict that higher wholesale prices will soon mean higher prices for U.S. consumers.

The report raised concerns about inflation in the coming months, although recent data showed that the rise in consumer prices stabilized at 2.7% in July.

Since Trump came to power, the average effective tariff rate in the United States has soared and has imposed new taxes on most goods entering the country.

He said the tariffs are taxes on import taxes, which will raise funds for the government and give our manufacturers an advantage over foreign competitors.

But economists warn that expanding U.S. production will be expensive and difficult, and the main impact of the new tax will be higher costs for businesses and consumers.

Analysts say construction inflationary pressures could also complicate U.S. central bank calls for lower interest rates, as Trump asked.

The Fed has placed its policies independent of the White House. It has cuts so far this year, fearing that lowering rates could potentially re-inflation could be triggered by lowering prices when prices are expected to rise.

But a string of weak job growth, coupled with cool inflation, has increased pressure on banks to boost the economy by reducing borrowing costs.

Treasury Secretary Scott Bessent called on the Fed to lower its key loan ratio by half a percentage point earlier this week at its next meeting in September.

“The huge surprise of producer prices highlights the dilemma facing the Fed,” wrote Matthew Martin, senior economist at Oxford economics.

“The whole picture remains that inflation is far from the Fed’s target compared to the unemployment rate and is likely to climb further in the coming months.”

The inflation rate of U.S. producers is the biggest report since June 2022, the height of post-pandemic inflation in the United States.

Wholesale prices for services, including warehousing and investment advice, rose 1.1%.

Meanwhile, the report said wholesale prices of commodities rose by 0.7% from June to July, with nearly half of the increase coming from higher food prices.

Prices in categories are exposed to tariffs such as home furniture and clothing, and also rising.

“New tariffs are continuing to create cost pressures in the supply chain that consumers will soon bear,” Samuel Tombs, chief economist at macroeconomics, wrote after the report.