In June 2023, inflation in the US rose to 2.7%, primarily due to tariff policies initiated by Donald Trump. The consequences of these policies are significantly impacting household finances and the overall economy.
Inflation Under Tariff Pressure
In the US, the inflation rate increased by 2.7% year-on-year in June, marking the fastest pace since February. This surge is largely attributed to the tariffs imposed by Donald Trump. Prices for furniture, appliances, and clothing have seen significant hikes. Goods affected by these taxes have become more expensive for companies, which have passed these costs onto consumers.
Gasoline prices have also risen, as have food prices. Though the increases are not immense, they accumulate, leading households to pay more without necessarily consuming more. This is only the beginning as new taxes are anticipated in the coming weeks, potentially worsening the situation.
Federal Reserve's Response
In the face of rising inflation, the Federal Reserve prefers to maintain interest rates. The situation is complex: the economy is slowing slightly while prices are escalating. Lowering rates could stimulate growth, but it might also exacerbate inflation.
Some officials advocate for quick action, while others prefer a wait-and-see approach. Meanwhile, the Fed opts for a cautious stance, wanting to comprehend the long-term impacts of Trump's economic measures on the economy first.
Risks of Economic Stagnation
Economists now fear stagflation, a rare phenomenon where prices rise while the economy slows. This scenario complicates everything. The Fed can no longer lower rates to spur growth without further pushing prices higher.
Many companies are in a tough spot, needing to choose between absorbing tariff-related costs, which reduces profits, or raising prices, which could turn away customers. In any case, the economy is slowing, and prices are rising, forming a difficult cycle.
Currently, some prices remain low, such as those for cars or plane tickets. However, these are exceptions. If trade tensions persist, other sectors may follow the same trend as appliances or clothing.
In conclusion, the current economic situation in the US requires careful monitoring and analysis from both consumers and suppliers. The uncertainty caused by tariff policies and rising inflation may further impact household financial stability and market equilibrium.
