U.S. producer prices climb, tariff fears grow

U.S. producer prices have climbed to their highest level in three years, rekindling debate over “tarifflation” as concerns grow that President Donald Trump’s tariff policies are increasing manufacturing costs for businesses and may soon be passed on to consumers.

The Labor Department’s Bureau of Labor Statistics reported on Aug. 14 local time that the Producer Price Index for July rose 0.9 percent from the previous month, well above the market forecast of 0.2 percent and the largest increase since June 2022, when it gained 1.1 percent. Core PPI, which excludes volatile food and energy prices, advanced 0.6 percent. Compared with a year earlier, the index climbed 3.3 percent, surpassing market expectations of 2.5 percent and June’s 2.4 percent gain.

The PPI, which measures price changes for raw materials, intermediate goods, and finished products, is typically passed on to consumers with a delay. Until now, businesses have kept consumer prices steady by stockpiling goods ahead of tariff implementation and absorbing costs through narrower profit margins. Two days before the PPI data was released, the Consumer Price Index had fallen short of market expectations. The sharp increase in producer prices, however, indicates that consumers may soon face the full impact of tariff-driven cost pressures.

Signs of inflationary pressure in the United States have tempered expectations for a Federal Reserve interest rate cut. St. Louis Federal Reserve Bank President Alberto Musalem told CNBC that a 0.5 percentage point “big cut” would be difficult to justify given the current economic conditions and outlook. His comments contrasted with those of Treasury Secretary Scott Bessent and others who have called for a half-point reduction. As optimism for a sharp rate cut faded, U.S. stock indexes closed mixed, while Bitcoin and other cryptocurrencies, which had recently reached record highs, fell about 3 percent in one day.


홍석호 will@donga.com