Trump's Tariff Gamble Are Companies Eating the Costs, or Are You?

Inflation Report: Are Companies 'Eating' Trump's Tariff Costs?

The latest inflation report, released by the Bureau of Labor Statistics, is under intense scrutiny as economists and consumers alike try to decipher the impact of President Trump's tariffs on the U.S. economy. The central question: are U.S. companies absorbing the cost of these tariffs, as the President has urged, or are they passing them on to consumers? This report offers the most concrete evidence yet.

Anticipation has been building, with forecasts suggesting a potential uptick in inflation. The Consumer Price Index (CPI), a key measure of price changes for consumer goods and services, is projected to show a **2.4% increase over the past 12 months in May**, compared to a 2.3% annual rate in April, according to a Dow Jones Newswires survey.

Here's a closer look at what economists are expecting:

• Overall CPI: Expected to rise to 2.4% year-over-year.
• Core Inflation: (Excluding food and energy) Forecast to increase to 2.9% annually, up from 2.8% in April.
• Monthly Core Inflation: Anticipated to climb to 0.3%, a slight increase from April's 0.2%.

President Trump's fluctuating tariff policies and trade deal announcements have undoubtedly injected uncertainty into the spending plans of both businesses and consumers. Sentiment surveys have reflected this unease, showing a decline in confidence since April, coinciding with the implementation of the "Liberation Day" tariffs that set the base U.S. import duty level to 10%.

While Trump campaigned on promises of price relief for Americans, economists argue that tariffs inherently lead to price increases. And, despite the President's requests, businesses are increasingly signaling that they will be forced to pass these higher costs onto their customers.

Walmart, a retail giant, has already indicated that consumers will soon see higher prices. Furthermore, the National Federation of Independent Businesses reported that a net 31% of its surveyed members plan to raise prices, up from 28% in April.

"Walmart making their announcement that customers are going to start seeing higher prices really underscores how businesses are starting to feel this," said Stephen Kates, financial analyst with Bankrate. "And if the largest businesses are saying this, smaller businesses are definitely feeling it, too — there’s no way around that fact.”

Other economic indicators point to building price pressures as well. In May, U.S. factories reported the highest share of price-increase reports since November 2022, according to S&P Global.

Moreover, firms surveyed in the Institute of Supply Management’s latest manufacturing report highlighted the disruptive impact of the President's tariffs on their ability to plan for the future amid rising costs.

Any potential price relief observed is likely a consequence of a broader economic slowdown, analysts suggest. A weaker labor market may be prompting consumers to curb spending. Data from Bank of America indicates that spending rates remain below pre-Trump levels, and the growth in airfare, hotel, and gas prices was likely tempered in May as consumers reduced travel.

Economists caution that even if May's data appears mild, the full impact of the tariffs may take time to materialize. Pantheon Macroeconomics analysts noted that it took three months for the price increases from Trump’s 2018 washing machine tariffs to appear in the data, but when they did, the impact was "rapid and complete." This suggests that the full effects of the recent tariffs, primarily announced in April, may not be fully reflected until July.

While inflation may not be as high as the levels seen in 2022, Bankrate's Kates warns that consumers will still feel the pinch: "It’s going to be a persistent itch that doesn’t go away," Kates said.

The inflation report paints a complex picture of an economy grappling with the consequences of trade policy. While the immediate impact might seem muted, the underlying trends suggest that the pressure on prices is building. It remains to be seen whether businesses can continue to absorb these costs, or if consumers will ultimately bear the brunt of the tariffs. The coming months will be crucial in determining the long-term effects on the U.S. economy.

Tags: US Tariffs, Inflation Report, Consumer Price Index, Inflation, US Economy, Price Growth, Trade War, Trump Tariffs, Import Duties, Core Inflation

Source: https://www.nbcnews.com/business/economy/may-inflation-2025-tariffs-trump-eat-rcna211826