US inflation has jumped to its steepest rise in five months, reaching 2.7% in June, according to consumer price data. Despite this, global stocks remain at record highs, and credit spreads are tightening.
Chief investment officer Mark Haefele of UBS Global Wealth Management notes that the recent acceleration in inflation reflects tariffs on goods most exposed to trade tensions. Households furnishings, appliances, electronics, apparel, and toys have seen significant price hikes. However, retail sales in these categories have dropped by 2% and 1.1% after adjusting for inflation.
The impact of tariffs is being felt across industries, with some companies, such as General Motors, already reporting losses due to the trade tensions. The automaker’s second-quarter earnings took a $1.1 billion loss, leading to a 32% decline in core profit.
Haefele warns that it’s unclear how exporters, importers, and consumers will divide the economic costs of tariffs. He will closely watch retail sales, inflation, and consumer spending data, as well as comments from company executives during earnings calls, to determine who is truly “eating the tariffs.”
Meanwhile, some fiscal offsets may be on the way, including extended tax cuts that could help stimulate the economy. However, risks are tilted in both directions, with potential inflation surges and profits slumping if companies absorb more costs.
As economists and policymakers monitor core inflation, retail sales, and corporate margins, one thing is certain: tariffs are no longer an abstract policy debate – they’re hitting home, one price tag at a time.
Source: https://fortune.com/2025/07/25/trump-tariffs-taco-trade-inflation-core-goods-ubs-haefele