US wholesale inflation surged unexpectedly last month as President Donald Trump’s sweeping taxes on imports are biting American consumers, pushing costs up higher and higher. 

The US Labour Department is reporting today that its producer price index, which measures inflation before it hits consumers, rose 0.9% last month from June, representing the biggest jump in more than three years. Compared with a year earlier, wholesale prices rose 3.3%, which is much higher than economists had expected.

Prices rose faster for producers than consumers last month, suggesting that American importers are now feeling the cost of Trump’s tariffs rather than passing them on to customers. Excluding volatile food and energy prices, the so-called core producer prices rose 0.9% from June, the biggest month-over-month jump since March 2022. 

Wholesale food prices 

Compared with a year ago, core wholesale prices rose 3.7% after posting a 2.6% year-over-year jump in June. Wholesale food prices rose 1.4% from June, led by a 38.9% surge in vegetable prices. The price of home electronic equipment gained 5% from June. 

Both are heavily imported in the U.S. However, some aspects of today’s producer price report were puzzling, including a big jump in profit margins at retailers and wholesalers. Economist Stephen Brown at Capital Economics found the increase “to put it lightly, counterintuitive given the anecdotal evidence that firms are absorbing the lion’s share of tariff increases in margins.’’

Christopher Rupkey, chief economist at FWDBonds, a financial markets research firm in America, wrote, “It will only be a matter of time before producers pass their higher tariff-related costs onto the backs of inflation-weary consumers.” 

Trump’s tariffs have generated considerable uncertainty about the U.S. economy, the world’s largest, which could explain some seemingly contradictory trends. Trump has negotiated trade agreements with several major U.S. trading partners, including the European Union and Japan. 

The fallout from the tariffs has also been delayed because many importers stockpiled products before the taxes took effect. Those inventories are diminishing. Also, the U.S. courts are hearing a challenge to Trump’s most sweeping tariffs and could strike them down.

Consumer prices 

The wholesale inflation report comes two days after the Labour Department reported that consumer prices rose 2.7% last month from July 2024, same as the previous month and up from a post-pandemic low of 2.3% in April. Core consumer prices rose 3.1%, up from 2.9% in June. Both figures are above the Federal Reserve’s 2% target.

The new consumer price numbers suggest that slowing rent increases and cheaper gas are partly offsetting the impacts of Trump’s tariffs. Many businesses are also likely still absorbing much of the cost of the duties instead of passing them along to customers via higher prices.