Fed Chair testifies that tariffs could drive up inflation, which is why rates were held steady

Despite concerns earlier this year that President Trump’s tariffs would cause a renewed bout of inflation, the prices of goods and services across the U.S. have remained relatively stable.

The personal consumption expenditures price index, the Federal Reserve’s preferred inflation gauge, rose 2.3% in May, modestly above the central bank’s 2% annual target. The May Consumer Price Index rose at an annual rate of 2.4%, cooler than economists expected.

The muted inflation data reflects short-term steps taken by some companies to offset the tariff impact, such as pre-ordering inventory, absorbing the cost of some tariffs to cushion consumers from price hikes, and leveraging loopholes to delay or lower duty payments, economists say.

Additionally, cost increases for parts and other intermediate inputs could take time to work their way through supply chains before they show up in consumer prices.

“Many businesses have been creative and savvy in using different means to buffer the initial shock,” EY-Parthenon chief economist Gregory Daco told CBS MoneyWatch.

That doesn’t mean consumers and businesses, who were battered by the highest inflation in decades during the pandemic, are out of the woods. Gennadiy Goldberg, head of U.S. rates strategy at TD Securities, thinks prices are likely to rise as tariffs gradually push up import costs in the second half of the year.

“We still think in next few months we’ll continue to see the impact of the new trade policies on price levels, and they should translate into higher inflation,” Goldberg said.

Here are three reasons why tariffs haven’t driven up inflation as much as many economists expected, at least for now.

Aggressive “front-loading”

After the Trump administration announced a range of tariffs on Canada, China, Mexico and dozens of other countries earlier this year, many companies scrambled to stock up, or front-load, on products, parts and other imports to avoid incurring added tariff costs.

“They tried to front-run the imposition of the duties by importing rapidly,” Daco said. “They bought goods they needed and stocked them, so that was the first line of defense against the tariffs.”

Much of that extra inventory remains in warehouses or on store shelves, allowing importers to delay price hikes.

“Lots of retailers pre-ordered inventory before the tariffs went into effect, so the inventory they’re selling has not been marked up yet,” Goldberg said.

Waiting for clarity

Some businesses facing higher tariffs are choosing to hold off on passing any cost increases through to consumers as they wait for the fog around U.S. trade policy to lift.

The Trump administration in April froze most of its tariffs for 90 days to allow time for negotiations, with that pause due to expire on July 9. And after announcing tariffs of as much as 145% on Chinese imports earlier this year, Mr. Trump and Chinese officials on Thursday said the two countries have agreed on the framework for a trade deal.

“We have had literally dozens of changes in tariff policy in the last five months. In that highly uncertain environment, companies that sell items that are subject to tariff may be cautious about raising prices immediately,” Charley Ballard, professor of economics emeritus at Michigan State University, told CBS MoneyWatch.

Companies often refrain from raising prices to avoid scaring away consumers and losing market share to competitors.

Added Daco: “Essentially, some business decided to not immediately pass on the cost. They said, ‘Let’s see if we can hold out for a month, delay some imports, use the inventory on hand and be creative in terms of our broader pricing strategy’.”

Although tariffs are paid by importers, which typically pass those costs on to consumers, some foreign exporters have also been willing to take a hit.

Lower tariff costs

Although Mr. Trump has announced sky-high tariff rates, the actual duties collected at the U.S. border so far are lower than the official rates. That’s because some importers have been able to skirt the levies by storing goods in so-called bonded warehouses or foreign trade zones.

Businesses can use bonded warehouses, which are usually located near major commercial ports, to temporarily store goods, components and other inputs without immediately having to pay tariffs or taxes.

“If you make use of a warehouse or so-called foreign trade zone, you are able to delay the payment of tariffs until these goods are put into commerce,” Daco said. “So it’s a free-trade zone, or imaginary area that is not subject to tariffs.”

Additionally, the U.S. has implemented a number of tariff exemptions and exclusions. In practice, that has resulted in the actual levies on imports often being lower than the nominal rate initially announced by the White House.

As of June, the effective U.S. tariff rate on all imports was around 10%, compared with an official average tariff rate of 15%.

Still, business can’t hold the line on price hikes indefinitely if tariffs remain elevated, experts say. Federal Reserve Chair Jerome Powell told lawmakers this week that tariffs could yet spark higher inflation, likely starting this summer,

“Part of that is due to the start-stop nature of the tariffs that have been introduced,” James Rossiter, head of global macro strategy at TD Securities, told CBS MoneyWatch.

“For us it’s a question of patience more than a mystery as to where it is,” he added. “The typical pass-through takes some time. We expect July to be when you start to see it more.”

NEW DELHI: US President Donald Trump’s wide-reaching tariff policies are beginning to take a toll on American consumers, with major companies announcing price hikes to counter rising import costs.

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Trump’s administration has imposed a 10% baseline tariff on most imports and a 30% duty on Chinese goods, with some categories, such as steel and aluminum, facing even steeper rates.

While a recent temporary deal reduced some tariffs on Chinese products, businesses are still grappling with increased costs and continued uncertainty over future trade policies.

Major brands hiking prices amid Trump tariffs

A growing number of major brands—including Walmart, Mattel, Ford, and Best Buy—have announced or hinted at price hikes as a direct result of Trump’s renewed tariff policies.

The sweeping import duties, especially on goods from China, are pushing companies to pass rising costs on to consumers.

Walmart:

Walmart said on April 15 it would raise prices due to “high” tariffs on Chinese-made products. CEO Doug McMillon stated that the company would try to keep prices low but acknowledged that “the magnitude of these tariffs makes it impossible to absorb all the pressure.”

Mattel:

Mattel the toy giant behind Barbie, revealed plans on May 6 to increase prices, though it aims to keep 40–50% of its products priced under $20.

CEO Ynon Kreiz said that although nearly half its products will still be priced under $20, others will increase in cost due to tariff pressures. He also called for the removal of tariffs on toys globally.

Best Buy:

Best Buy warned during its March earnings call that suppliers were increasing prices across product lines, with those costs likely to be passed on to consumers—especially if temporary exemptions for electronics expire.

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Shein and Temu:

Shein and Temu popular Chinese e-commerce platforms, have also raised prices following Trump’s move to eliminate the “de minimis” exemption that spared low-cost imports from tariffs. Temu patio chairs jumped from $61.72 to $70.17, while Shein’s swimsuit sets saw a 91% price spike.

Ford and Subaru:

Imported cars now face a 25% tariff, prompting Ford to raise vehicle prices up to 1.5% in the second half of 2025.

Ford also confirmed sticker price hikes for three Mexico-made models. Subaru said it is adjusting prices on several models due to “market conditions.”

Ralph Lauren,

Adidas,

Nike:

Ralph Lauren plans to increase prices more aggressively than previously planned. Adidas CEO Bjørn Gulden warned that tariffs would “eventually cause higher costs” across all US product lines. Nike is also set to raise prices starting June 1, though it did not officially link the move to tariffs.

As tariffs reshape global supply chains and retail economics, consumers are already beginning to feel the impact at the checkout counter, and the trend may intensify if trade tensions escalate.

Some companies are preparing to raise prices in response to President Donald Trump’s tariffs — or already have.

Some companies are preparing to raise prices in response to President Donald Trump’s tariffs — or already have. Brandon Bell/Getty, Tyler Le/BI

Some companies are preparing to raise prices in response to President Donald Trump’s tariffs — or already have. Brandon Bell/Getty, Tyler Le/BI

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Prices are expected to go up this year as many companies signal plans to raise them in response to President Donald Trump’s slew of tariffs.

While firms raise prices for many reasons, some were blaming price hikes on tariffs long before Trump’s so-called “Liberation Day” on April 2, during which he announced a 10% baseline tariff on imports from most countries, except Canada and Mexico, and a host of “reciprocal” tariffs on top of that.

The situation is fluid, as various countries continue to negotiate potential trade deals with the US.

Some economists have said that Trump’s tariffs — and the uncertainty with his overall trade policy — could lead companies to raise prices on the goods they produce.

Here are the companies that have implemented or warned of price increases in recent months.

ConAgra

ConAgra —makers of Pam cooking spray, Reddi-wip, and other snack foods — said it will need to take “targeted pricing actions” to account for steel and aluminum tariffs, among other concerns.

“It’s really no different from avocados,” CEO Sean Connolly told The Wall Street Journal. “We have no choice but to source it elsewhere.

Nike

Nike is planning to raise prices in order to offset an expected $1 billion additional tariff costs in the 2026 fiscal year, the company told investors in a June 26 earnings call.

“These tariffs represent a new and meaningful cost headwind,” said CFO Matthew Friend during the analyst call about Nike’s 2025 fiscal year.

The company will be implementing a “surgical price increase” starting this fall in the US, with “phased implementation.” The company hasn’t revealed which products will be affected, or by how much prices will increase.

Macy’s

In its Q1 earnings report on May 28, Macy’s announced it was reducing its earnings outlook for the year because of several factors, including higher tariffs and consumers’ moderating their discretionary spending.

In a post-earnings call, Macy’s CEO, Tony Spring, added that the department store chain would be raising prices on some items to account for higher tariffs.

Spring said that higher “pricing is working its way into the system slowly,” adding, “That’s why we have taken a more cautious approach to our outlook for the year.”

The company’s COO and CFO, Adrian Mitchell, followed up to Spring’s comment. “We are not just broadly increasing price,” he said. “We’re being incredibly surgical about the situation with tariffs.”

He added, “We’re making selective price increase in selective brands, selective categories. So some of the impact on our gross margin this year is going to be around the tariffs.”

The news comes in the midst of Macy’s plan to close around 150 underperforming stores around the country by 2027 as it leans into expanding its luxury brands, including the high-end department store Bloomingdale’s and beauty chain Bluemercury.

Shein and Temu

The two Chinese retailers released almost identical notices on April 16, both reading: “Due to recent changes in global trade rules and tariffs, our operating expenses have gone up.”

“To keep offering the products you love without compromising on quality, we will be making price adjustments starting April 25, 2025,” Shein’s statement said.

Shein, a fast-fashion retailer, and Temu, a marketplace for everything from home goods to electronics, promised their US customers eight final days of low-price shopping.

In addition to hiking tariffs on Chinese imports, Trump also cracked down on the de minimis trade loophole that allowed small parcels under $800 to enter the US tax-free. Shein and Temu were large beneficiaries of this loophole.

Ford

Bloomberg reported that the automaker plans to raise prices on new gas and electric cars starting in May unless Trump gives the industry some relief from tariffs.

Ford, in a memo to dealers viewed by Bloomberg, said that the company anticipates “the need to make vehicle pricing adjustments in the future, which is expected to happen with May production.” Prices won’t change for vehicles in inventory now.

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On April 14, Trump told reporters that he was contemplating a temporary tariff exemption for autos to give manufacturers more time to move production to the US — but no blanket exemption has yet been instituted.

Conagra

Conagra Brands CEO Sean Connolly told Reuters on April 3 that the food company may have to hike prices to offset the cost of tariffs on ingredients like cocoa, olive oil, palm oil, and a type of steel used for its canned products.

Connolly said that Conagra, which makes products such as Hunt’s ketchup, imports tin plate steel for its canned food and tomatoes from Mexico.

It was too early to tell how big price hikes on the company’s food products would be, he added.

Volkswagen

According to a memo first reported by Automotive News, Volkswagen said it would place an import fee on vehicles made outside of the US in response to Trump’s 25% tariff on car imports.

Kjell Gruner, Volkswagen’s North America chief executive officer, recently said the carmaker would keep prices steady through the end of May but that they could increase in June.

Best Buy

Best Buy CEO Corie Barry said during the company’s March earnings call that Trump’s tariff plans are likely to increase prices.

“Trade is critically important to our business and industry. The consumer electronic supply chain is highly global, technical and complex,” Barry said. “We expect our vendors across our entire assortment will pass along some level of tariff costs to retailers, making price increases for American consumers highly likely.”

Target

Target CEO Brian Cornell told CNBC in a March interview that Trump’s 25% tariff plan on goods from Mexico and Canada would likely result in price increases on produce.

“Those are categories where we’ll try to protect pricing, but the consumer will likely see price increases over the next couple of days,” Cornell said.

Some prices at the store have already gone up.

Stanley Black & Decker

Donald Allan, the CEO of the manufacturing company Stanley Black & Decker, said during a February earnings call: “Our approach to any tariff scenario will be to offset the impacts with a mix of supply chain and pricing actions, which might lag the formalization of tariffs by two to three months.”

Allan had previously told analysts in an October earnings call that the company had been evaluating “a variety of different scenarios” to plan for new tariffs under Trump.

“And obviously, coming out of the gate, there would be price increases associated with tariffs that we put into the market,” Allan said, adding that “there’s usually some type of delay given the processes that our customers have around implementing price.”

Walmart

On May 15, Walmart executives said price increases were likely to spike even higher, blaming Trump’s ongoing trade war.

“Even at the reduced levels, the higher tariffs will result in higher prices,” CEO Doug McMillon said during the company’s first quarter earnings call.

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US sales were boosted by shoppers looking to beat tariff-related price hikes — but despite strong first-quarter results, Walmart’s chief financial officer, John David Rainey, said the extra costs are too great for the company to take on without passing part of the burden on to consumers.

“We’re wired for everyday low prices, but the magnitude of these increases is more than any retailer can absorb,” he said.

Meanwhile, Walmart workers have shared photos of price hikes being applied to store products.

Columbia Sportswear

Tim Boyle, the CEO of Columbia Sportswear, told analysts on an October earnings call that the company was “very concerned about the imposition of tariffs. ” He said that while he considered Columbia adept at managing tariffs, “trade wars are not good and not easy to win.”

Boyle also told The Washington Post in October that the company was “set to raise prices.”

“It’s going to be very, very difficult to keep products affordable for Americans,” he said. He later said in a February interview with CNBC that “we need some surety about what is going to happen” before making price changes.

AutoZone

Philip Daniele, the CEO of the auto-parts company AutoZone, told analysts on a September earnings call that tariff policies had “ebbed and flowed over the years,” and if Trump implemented more tariffs, “we will pass those tariff costs back to the consumer.”

“We generally raise prices ahead of that,” Daniele said, adding that prices would gradually settle over time. “So, that’s historically what we’ve done,” he said.

A 25% tariff on car imports is expected to increase manufacturing costs by anywhere from $4,000 to $12,000.

Procter & Gamble

P&G, the consumer goods company behind brands like Tide and Charmin, is looking at raising prices on new and existing products.

CEO Jon Moeller told CNBC that price hikes are “likely.”

“We will have to pull every lever we have in our arsenal to mitigate the impact of tariffs within our cost structure and P&L,” P&G’s CFO, Andre Schulten, said on a call with reporters.

The company is evaluating “exactly what is the right plan by brand, by market, what combination of pricing, over what period of time,” Schulten added.

Ferrari

Italian luxury carmaker Ferrari said in March it’d raise prices by up to 10% on certain models imported to the US starting April 2.

The change was made “based on the preliminary information currently available regarding the introduction of import tariffs on EU cars into the USA,” the company said.

Hermès

Eric du Halgouët, executive vice president of finance at the company, told analysts on a call in April that Hermès, the luxury retailer known for its iconic Birkin handbags, hadn’t yet been impacted by the tariffs, but said the company would raise prices in the US in May.

“The price increase that we’re going to implement will be just for the US. Since it’s aimed at offsetting the increase in tariffs, that only applies to the American market,” du Halgouët said on the call.

Nintendo

While Nintendo’s Switch 2 console hasn’t seen a price hike over tariffs, Nintendo did raise the price on some of its accessories “due to changes in market conditions.”

“Other adjustments to the price of any Nintendo product are also possible in the future depending on market conditions,” the company said.

Camera makers Nikon, Canon, and Leica

Several big suppliers of photography equipment have announced their own price hikes.

“Due to the recent tariffs, a necessary price adjustment for products will take effect on June 23, 2025. We will be carefully monitoring any tariff developments and may adjust pricing as necessary to reflect the evolving market conditions,” Nikon said in an announcement in May.

In its first-quarter earnings call, Canon said it will raise prices but is still “in the process of estimating the timing and amount of the increase.”

At Leica, price increases across some product lines took effect May 1.

“This is not a Leica-initiated price increase, but a result of the newly enacted tariffs that began on April 5 on imported products, which are significantly impacting the cost of imported goods, including photographic equipment and optics,” Leica USA Trade Marketing and Product Communications Manager Nathan Kellum-Pathe said in a statement to Digital Camera World in April.

How have prices affected you? Reach out to cboudreau@businessinsider.com.

President Trump is reportedly pushing for higher blanket tariffs on imports from the European Union, throwing a wrench in negotiations ahead of an Aug. 1 deadline for sweeping duties to take effect.

The Financial Times reported that Trump wants a minimum of a 15% to 20% tariff on EU goods as part of any deal. Trump has threatened the bloc with 30% duties beginning Aug. 1. That is the date he is also set to impose tariffs on an array of other trading partners, as well as potential sectoral levies on copper, pharmaceuticals, and semiconductors.

The EU has left the latest discussions disappointed, according to the report, and considering options in negotiations and in potential retaliation.

“We don’t want a trade war, but we don’t know if the US will leave us a choice,” the report quoted a senior EU diplomat as saying.

Earlier this week, Trump said he would soon send letters to over 150 smaller US trade partners, setting blanket tariff rates for that large group.

Trump has already sent letters to over 20 trade partners outlining tariffs on goods imported from their countries. The letters set new baseline tariff levels at 20% to 40% — except for a 50% levy on goods from Brazil in a move that waded into the country’s domestic politics.

Last week, Trump announced a 35% tariff on Canadian goods and followed that up with promises of 30% duties on Mexico and the EU. The letters have at times upended months of careful negotiations, with Trump saying he is both open to reaching different deals but also touting his letters as “the deals” themselves.

As markets focus on US talks, here is where things stand with other key partners:

Vietnam: Trump said a deal with Vietnam is “pretty well set.” Two weeks ago, Trump said the pact would see the country’s imports face a 20% tariff — lower than the 46% Trump threatened in April. In addition, there’s a higher 40% tariff “on any transshipping” — when goods shipped from Vietnam originate elsewhere, like China.

India: Trump’s tariffs on Brazil have raised the stakes for India, another member of the BRICS coalition. Bloomberg reported that the countries are working toward a framework deal that could see US tariffs on goods from India drop below 20%.

Read more: What Trump’s tariffs mean for the economy and your wallet

Here are the latest updates as the policy reverberates around the world.

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1456 updates

Jakarta. The US remains Indonesia’s biggest trade surplus driver as of April, according to the Central Statistics Agency (BPS) as Jakarta’s deadline for its tariff talks is approaching.

Jakarta to this day is still trying to get US President Donald Trump to roll back his upcoming 32 percent import tax tariffs on Indonesian goods, which the Southeast Asian country feared could affect its trade performance. Chief Economic Minister Airlangga Hartarto, who leads the tariff negotiations, had set a target to reach a deal with the US within 60 days. In other words, they wish to conclude the talks of the possibility of bringing down the tariffs this month. Trump had accused the Southeast Asian country of unfair trading practices that caused Washington to suffer a trade deficit so big that it prompted the country to impose tariff hikes on Indonesian goods. Indonesia offered to increase its US imports to sweeten the deal, but data showed that the gap in trade remained large.

Pudji Ismartini, a deputy at BPS, revealed Monday that the US continued to clinch the top spot for Indonesia’s overall trade surplus contributors, ahead of India and the Philippines. A surplus or a positive trade balance means that a country’s exports exceed its imports, while a deficit is the other way around.

“The US is the biggest contributor to Indonesia’s overall trade, which includes oil and gas as well as other sectors, in January-April 2025. The surplus that we had with the US reached $5.44 billion,” Pudji told a press briefing.

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Read More: ASEAN Wants to Meet Trump as Clock Ticks on Tariffs

The latest data also marked an increase compared to the $4.37 billion surplus that Indonesia posted when trading with the US over the same four-month period last year. China, which has gained recognition as the US’ top rival, was the biggest culprit of Indonesia’s deficit. Indonesia suffered a $6.28 billion trade imbalance with China in the first four months of 2025.

Electrical machinery, footwear, and apparel have mainly driven the surplus in Indonesia-US non-oil and gas trade this year. The Indonesian footwear industry added about $838.4 million surplus in January-April 2025, while electrical machinery gave nearly $1.3 billion to the positive trade balance. Indonesia saw a $801.4 million surplus in apparel trade with the world’s economic superpower.

“In April 2025 alone, Indonesia’s US-bound exports reached $2.08 billion. Imports from the US totaled $960 million.” Pudji said, thus indicating another positive trade balance.

A 10 percent universal tariff already came into force on all foreign goods entering the American market on April 5. This means that the data above already took into account the post-tariff trade. Trump has delayed the steeper 32 percent duties until July 9.

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