Inflation Economy Tariffs Donald Trump See all topics Follow

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New York —

This week, we got two closely watched inflation reports: One on Tuesday that seemed fine-ish, and one Thursday that made everyone sit up straight and take notice.

If you’re just clocking the headlines, it might seem like prices are both flat and surging?

The reality is that consumer inflation (the kind regular schmoes like us feel) was pretty mild. Certain items are getting more expensive, like housing and meat, while others, like gasoline, have fallen.

But wholesale inflation (the kind businesses feel when making the stuff we buy), is another story.

On Thursday, the Producer Price Index, which tracks what businesses are shelling out for raw materials every month, came in hot — up 3.3% year over year in July. That is the fastest pace since June 2022, the peak of the Covid-era inflation bonanza. At that time, producer prices were up 11.3% year over year — not exactly a moment any of us want to think about going back to.

Even Wall Street, which lately has been drunk on a cocktail of AI hype and rate-cut anticipation, briefly sobered up to take in the Thursday wholesale report. (Stocks briefly dipped in the morning and finished the day mostly flat.)

The upshot: American businesses have been eating the higher prices tariffs create, partly because they suspected President Donald Trump would delay or scale back his agenda, and partly because they didn’t want to invite one of Trump’s public scoldings.

But companies can’t keep that up forever, and they’re starting to pass on the costs to you and me.

This is, after all, how tariffs work. Despite Trump’s repeated lie that foreign governments pay for tariffs, the reality is (and has always been) that American businesses have to pay for them, and then consumers would be made to feel the pain.

“Tariffs don’t somehow disappear into the ether,” wrote Peter Boockvar, chief investment officer at Bleakley Financial Group. “And if consumer prices don’t accelerate from here, we have a profit margin hit on our hands. Pick your poison.”

Here’s where things could get really icky for consumers: Right now, the lion’s share of cost pressures aren’t even coming from tariff-sensitive goods.

Take housing, for example. Home prices are elevated largely because there aren’t that many homes where a lot of people want to live. That sort of thing has little connection to global trade, and instead comes from the chronic lack of housing built after the 2008 real estate-fueled economic crash. Other staples like coffee and eggs have also shot up at various points in the past year because of weather issues and avian flu, respectively.

But in the coming months, those supply issues will still be present when the tariff pain kicks in. Even if you take Trump at his word that tariffs will make the country more prosperous over time, there’s no way to escape the immediate impact of higher prices.

That shift could happen at a politically inconvenient time for Republicans heading into midterm elections next year.

The American public is increasingly souring on Trump’s job performance. According to a Pew Research poll out Thursday, the president’s job approval stands at 38%, with 60% disapproving.

So far, the administration has landed two major policy initiatives: tariffs, which Trump sees as a panacea for all economic ills, and his tax and spending law known as the “One Big Beautiful Bill Act” — both of which garner “considerably more disapproval than approval,” according to Pew.

The full price impact of tariffs hasn’t hit customers’ wallets yet, and already 61% of Americans disapprove of the policy.

Tariffs, and the inflation they’re creating, pose a political risk for Trump, whose agenda has been largely rubberstamped by the Republican-controlled legislature. That political risk seems to be irking the president already. Earlier this week, he called on Goldman Sachs to fire its top economist after the bank published research saying the thing most economists agree is true: that consumers are bound to pay the bulk of tariff costs as soon as October.

Tariffs are also threatening to derail another Trump priority — getting the Federal Reserve to lower interest rates and thereby juice economic growth. That’s something the central bank will be loath to do if prices continue rising.

At a White House event Thursday, Trump said inflation is “down to a perfect number.”

Allison Morrow