The second wave of tariffs under President Trump’s leadership had experts bracing for an economic shake-up. Warnings were loud and clear: consumer prices would climb fast, inflation would spiral, and household budgets would take a hit.

But months into the tariff expansion, reality tells a different story — at least for now.

What’s Happening With Inflation?

Inflation hasn’t surged like many anticipated. In fact, according to the Bureau of Labor Statistics, consumer prices only ticked up 2.4% year-over-year last month — barely above April’s 2.3%. That figure marks the lowest inflation rate since early 2021.

Even the Federal Reserve’s preferred index, the Personal Consumption Expenditures (PCE) excluding food and energy, showed core inflation dropping to 2.5%, the lowest since March 2021.

That’s a far cry from predictions. Goldman Sachs had projected a 6.3% rise in core goods inflation by year-end, while JPMorgan warned of inflation nearly doubling. Consumers, too, expected steeper price hikes — a University of Michigan survey found Americans in May believed inflation would hit 6.6% this year.

That number eased slightly in June, but expectations for 2025 still sit at 5.1%.

Tariffs Are Up — But Prices Aren’t (Yet)

Freepik | New car prices surprisingly fell 0.2% in May, staying close to pre-tariff levels despite a 25% import tax.

Here’s the context: the average U.S. tariff rate jumped from 2.3% in 2024 to 14.1% in 2025, according to Fitch Ratings. That’s nearly a 12 percentage point hike. Trump’s administration has placed tariffs on $2.3 trillion worth of imports this year alone — 71% of all goods coming into the U.S.

So, why haven’t prices followed suit?

1. Many retailers are still selling inventory imported before tariffs took effect.
2. Electronics like PCs and AV equipment have seen moderate price increases.
3. Automobiles, despite a 25% tariff on vehicles and some parts, have actually dropped in price. New car prices fell 0.2% in May and remain just 2.5% above pre-tariff levels.

Supply Chains Delay Impact

Federal Reserve Chair Jerome Powell confirmed this lag, explaining that many products currently on shelves were brought in months ago. Once that stock clears, the full impact of tariffs could surface.

Analysts from Telsey Advisory Group tracked 80 consumer products and found that only 19 increased in price since mid-April — while 16 actually decreased. Wirecutter tracked 40 popular products and noted minimal movement: 10 rose, and only five by more than 7%.

This buffer period may not last. Inventory cycles usually run 1–2 months. As pre-tariff goods disappear, price increases are likely to spread across more categories.

Businesses Are Watching Closely

Retail giants like Walmart, Home Depot, Costco, and Target have hinted at selective price increases. While they plan to shield customers from major price jumps, low profit margins mean some cost pass-through is inevitable. When U.S.-made alternatives are too pricey or unavailable, tariffs make imports more expensive — and that extra cost trickles down.

Small businesses are feeling the squeeze first. Without the supply chain leverage of larger retailers, they face tough choices: raise prices, reduce inventory, or cut costs elsewhere. Many report that switching to domestic suppliers isn’t always an option, either due to availability or higher prices.

Instagram | retailwire | Major retailers like Walmart will selectively raise prices due to slim profit margins.

Could Tariff-Driven Inflation Hit in Late 2025?

Some economists argue the real effects are just delayed. Stephanie Roth of Wolfe Research said price increases are a matter of “when,” not “if.” The Institute for Supply Management’s April report showed the largest price increase since late 2022 and shrinking business inventories — both signs that inflation may be on its way up.

Kristy Akullian, head of iShares Investment Strategy, noted that low inventories typically push prices higher. She expects tariff-related inflation to become more visible soon, especially as companies begin passing added costs along the distribution chain.

Powell echoed this, stating many businesses have already told the Fed they expect to raise prices later this year. That aligns with projected inventory depletion by late summer — around August or September — when fresh, higher-cost imports reach store shelves.

The Calm Before the Cost?

While prices have remained steady so far, the cushion provided by pre-tariff inventory is wearing thin. If consumer goods companies begin pricing in the higher cost of imports, Americans could start noticing higher price tags by the end of summer.

Retailers, economists, and the Federal Reserve are all watching closely. Whether this quiet period continues — or gives way to rising prices — depends largely on how companies absorb or pass along the cost of tariffs.

As it stands, the current inflation climate feels more like a pause than a permanent win.