The Tariff Tab is Coming

For the week ended 8/16/25.

First the good news: year-over-year inflation held steady in July at 2.7%, matching June’s reading and coming in just below the 2.8% economists had penciled in. Cue cautious applause. This has given more weight to those calling for FOMC rate cuts in the coming months.

Now, the warts. Core inflation (that pesky measure excluding food and energy) rose 3.1%, overshooting expectations. And as you’d guess, tariffed goods saw the sharpest price hikes.

Meanwhile, wholesale prices in July jumped 0.9%, the biggest monthly surge since March 2022. Put differently: nearly a full percentage point in a single month. Annualize that and you’d need a stiff drink. Sure, producer prices bounce around from month to month, so maybe take this with a very small grain of salt. Still, it appears consumer prices are creeping higher more slowly than many feared. That suggests companies have been swallowing some of the tariff costs – though eventually, they’ll pass that bill to us.

Markets took the news in stride. The S&P 500 rose 1.0% on the week, while overseas stocks did even better, up 1.9%. Everything else was basically a rounding error – cash gained 10 bps and domestic bonds slipped 2 bps. Yes, 2 bps. I’m splitting hairs, but it’s Monday, and we count everything.

Looking ahead, the early week will be quiet for economic data. Wednesday brings FOMC meeting minutes, Thursday adds PMI numbers, and Friday closes with a Powell appearance. Until then, may you enjoy the back half of August, look forward to cooler weather, and start sharpening your pencils for a productive fall. Good morning. 

Interesting data point of the week.

Source: Visual Capitalist

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