July saw unexpected cost increases among American wholesalers due to tariffs
The Producer Price Index (PPI) in the U.S. saw a significant surge of 0.9% in July 2025, marking the largest increase in over three years. This rise, according to experts, is largely attributed to President Trump's tariffs on imports, signaling a potential rise in consumer prices over time [1].
Initially, consumer prices have been relatively slow to rise in 2025, with businesses absorbing some costs before tariffs took full effect. However, economists warn that this capacity is waning, and tariff-related cost increases are starting to reach producers [1][2].
The biggest month-over-month jump in core producer prices, excluding food and energy prices, was seen in June, with a 0.9% rise. This was accompanied by a 1.4% increase in wholesale food prices, led by a 38.9% surge in vegetable prices [1].
The price of home electronic equipment also gained 5% from June, indicating a broader trend of rising wholesale prices [1].
Despite the current rise in core inflation, the overall inflation rate remains below early post-tariff projections [2][3]. Economists predict tariffs will add roughly $2,400 per household this year, with price hikes in specific categories such as apparel and automobiles expected in the near future [2].
The rise in wholesale prices can offer an early look at where consumer inflation might be headed. Some components of wholesale prices, notably measures of health care and financial services, flow into the Federal Reserve's preferred inflation gauge - the personal consumption expenditures, or PCE, index [4].
In contrast, consumer prices have risen by 3.1% last month, up from 2.9% in June, surpassing the Federal Reserve's two per cent target [5]. The consumer price index increased by 2.7% last month compared to July 2024, the same as the previous month [5].
Slowings in rent increases and cheaper gas are partly offsetting the impacts of Trump's tariffs on inflation [5]. However, the gradual rise in wholesale prices suggests that more consumer price inflation is likely ahead, though the impact will likely emerge gradually rather than abruptly [1][2][3].
The Labor Department's Bureau of Labor Statistics issues both the producer and consumer inflation numbers [2]. In July 2025, the bureau reported a 0.9% increase in the producer price index [6]. Trump's dismissal of the director of the BLS, groundlessly accusing the bureau of rigging the numbers for political reasons, followed the issuance of a disappointing jobs report for July [7].
Trump's implementation of sweeping taxes on imports and his subsequent nomination of a partisan idealogue to replace the dismissed director have raised concerns about political interference in economic data that investors, policymakers, businesses, and the Federal Reserve rely on to make decisions [7].
In conclusion, tariffs are fueling wholesale price increases that are increasingly difficult for businesses to absorb, signaling a forthcoming rise in consumer price inflation, particularly for tariff-exposed goods. The impact will likely emerge gradually rather than abruptly [1][2][3].
The rise in wholesale prices, as seen in the health care and financial services sectors, could potentially reflect an early indication of where consumer inflation might head, with experts predicting tariffs will contribute roughly $2,400 per household this year, mainly affecting categories such as apparel and automobiles.
The gradual increase in wholesale prices, particularly those in sectors like health and finance, is significant because some components of these prices contribute to the Federal Reserve's preferred inflation gauge - the personal consumption expenditures, or PCE, index.
