President Trump’s tariffs are now having a tangible impact on American consumers, with the August CPI report showing price increases in tariff-sensitive categories such as food, clothing, vehicles, and household goods. The increases are adding to the pressure on households as prices for basic goods such as coffee, beef, rice, and fresh produce rise sharply.
In addition to food, the automotive sector was also affected as parts prices rose 0.6% and new vehicles rose 0.3%. Furniture, mattresses, and hardware also saw price increases. This pressure proves that the burden of tariffs is increasingly being felt directly by consumers, and is no longer just a trade policy issue in Washington.
However, tariffs are not the only factor. Services inflation is still surging, with airfares rising nearly 6% in August after a 4% increase in July. Housing costs are also higher than expected, making the Federal Reserve’s efforts to stabilize prices more challenging as it prepares to cut interest rates next week.
The central bank’s focus is now shifting to labor market weakness. Weekly jobless claims surged to their highest level in nearly four years, while employment data showed job gains were much slower than before. This raised concerns that an economy previously labeled “robust” is now becoming more fragile.
Among investors, sentiment was mixed. The AAII survey showed nearly half of investors were pessimistic about the market outlook, even as major stock indexes continued to hit new records. Citi’s Levkovich Index, meanwhile, was still signaling “euphoria,” reflecting a market that is overly optimistic relative to economic fundamentals.
Still, major banks including Deutsche Bank, Wells Fargo, Barclays, and Yardeni Research remained bullish on the stock market, raising their 2025 S&P 500 targets, with some expecting it to hit 7,000. But analysts warned that if labor weakness and inflation persist, the AI-led investment boom may not be sustainable.
