U.S. inflation surged to 2.7% in June, marking the steepest rise in five months, according to the latest consumer price data. UBS Global Wealth Management analyzed the situation, noting that the increase in inflation is particularly evident in core goods, which have seen a two-year high in price hikes (source). This rise is largely attributed to new tariffs impacting household furnishings, appliances, electronics, apparel, and toys.
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As reported by IndexBox, the U.S. retail sector has experienced a decline in sales for electronics and home furnishings by 2% and 1.1%, respectively, once adjusted for inflation. Despite these declines, overall retail sales volumes have managed a modest increase of 0.4% month-over-month, demonstrating a degree of resilience in consumer spending.
Companies like General Motors are already feeling the pressure, with the automaker reporting a $1.1 billion loss in second-quarter earnings due to tariffs. This has led to a 32% decline in core profit, prompting GM to implement price increases, cost-cutting measures, and supply-chain adjustments. The ongoing tariff environment poses a risk of further squeezing margins or necessitating higher consumer prices.
UBS Chief Investment Officer Mark Haefele emphasizes the importance of monitoring upcoming data on retail sales, inflation, and consumer spending to understand who will ultimately bear the cost of tariffs. The “One Big Beautiful Bill,” which introduces extended and new tax cuts funded partly by tariff revenue, may offer some fiscal relief, although the extent of this revenue remains uncertain.
With the full impact of tariffs beginning to surface, economists and policymakers are closely watching core inflation, retail sales, and corporate margins. The certainty remains that tariffs are now a tangible issue affecting the economy, influencing prices and corporate strategies.
