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The US economy is feeling the real weight of President Donald Trump’s aggressive trade policy. Fresh CPI data shows consumer prices climbed 2.7% year-on-year in July, signaling that the universal 10% tariff and targeted levies on steel, aluminum, and other key imports are beginning to ripple through markets.
Core inflation, which excludes food and energy, rose 3.1% over the past month. Restaurant and takeout prices surged 3.9% over the year, pushing overall food costs higher, while used cars, housing, and medical care all outpaced the average inflation rate. Energy prices dropped 1.6% over the year, helping temper broader inflation — but not enough to offset the overall trend.
While some retailers stocked up early to cushion the blow, higher import costs are now reaching consumers. Executives at Walmart, Nike, and Macy’s have already warned about price hikes, and July’s data shows their predictions are playing out.
The labor market is also under strain. Job gains for May and June, once thought to be a robust 291,000, were revised down to just 33,000. This unexpected slowdown leaves the Federal Reserve caught between its dual mandate: keep inflation in check while supporting employment.
Trump, however, remains defiant. Hours before a midnight deadline, he extended the timeline for steep new tariffs on China by 90 days to allow negotiations to continue. Still, his administration insists tariffs are a net positive, claiming they bring “massive amounts of cash” into the Treasury.
With core economic indicators now clearly shifting, investors and market participants are bracing for the next move — both from the Fed, which has resisted cutting rates, and from the White House, where the president has shown he’s willing to rewrite the trade playbook in real time.
For traders, these shifts mean volatility, and volatility means opportunity. The unfolding tariff drama is more than political theater — it’s a live catalyst for currency, commodity, and equity markets, as well as a potential driver for alternative assets like crypto.
