Since “Liberation Day” back on April 1, 2025, and even before that, trade has been a major news topic. The current administration’s strategy to use tariffs and the size of the U.S. economy as leverage to change trade relationships with the rest of the world has generated a lot of uncertainty in the market. Both ag and non-ag industries have reacted to the almost daily trade talk news. Arguments for and against tariffs are all over the place, with the main question being, who is going to pay for the tariff hikes?
To better address this question, it is important to differentiate between short- and long-term effects as the market adjusts to news regarding tariffs. Tariffs are a tax imposed on imported goods and services. Sellers will do their best not to pass the tax to the consumers as that will probably reduce the quantity demanded and potentially reduce their market share to competitors less affected by tariffs. Therefore, to keep their market share, sellers might absorb some of the impact of the tariffs in the short run waiting for the results of trade negotiations. However, if sellers believe that the new tariff rates will remain in place for the long run, they might decide to pass the cost of the tariffs to consumers as their profit margins are probably reduced.
To illustrate, Table 1 shows the monthly percent changes in CPI for all urban consumers, which shows that there has not been a major change in CPI after “Liberation Day.” The latest figures for July 2025 show that the CPI for all items is 0.2 percent, while food remained unchanged and energy decreased 1.1 percent. In addition, the un-adjusted 12-month CPI ending in July 2025 shows 2.7 percent for all items, which is within normal ranges, especially coming off a historic high inflation over the last couple of years. Food items went up 2.9 percent, with the largest increase being in food away from home at 3.9 percent, while energy went down by 1.6 percent. Will this continue over the intermediate- and long-run? Only time will tell.
Table 1. Percent Changes in CPI for All Urban Consumers (CPI-U): U.S. city average
| Seasonally adjusted changes from the preceding month | ||||||||
| Jan. 2025 | Feb. 2025 | Mar. 2025 | Apr. 2025 | May2025 | Jun. 2025 | Jul. 2025 | Un-Adjusted 12-month* | |
| All Items | 0.5 | 0.2 | -0.1 | 0.2 | 0.1 | 0.3 | 0.2 | 2.7 |
| Food | 0.4 | 0.2 | 0.4 | -0.1 | 0.3 | 0.3 | 0.0 | 2.9 |
| Food at home | 0.5 | 0.0 | 0.5 | -0.4 | 0.3 | 0.3 | -0.1 | 2.2 |
| Food away from home | 0.2 | 0.4 | 0.4 | 0.4 | 0.3 | 0.4 | 0.3 | 3.9 |
| Energy | 1.1 | 0.2 | -2.4 | 0.7 | -1.0 | 0.9 | -1.1 | -1.6 |
| Energy commodities | 1.9 | -0.9 | -6.1 | -0.2 | -2.4 | 1.0 | -1.9 | -9.0 |
| Gasoline (all types) | 1.8 | -1.0 | -6.3 | -0.1 | -2.6 | 1.0 | -2.2 | -9.5 |
| Fuel oil | 6.2 | 0.8 | -4.2 | -1.3 | 0.9 | 1.3 | 1.8 | -2.9 |
| Energy Services | 0.3 | 1.4 | 1.6 | 1.5 | 0.4 | 0.9 | -0.3 | 7.2 |
| Electricity | 0.0 | 1.0 | 0.9 | 0.8 | 0.9 | 1.0 | -0.1 | 5.5 |
| Utility (piped) gas service | 1.8 | 2.5 | 3.6 | 3.7 | -1.0 | 0.5 | -0.9 | 13.8 |
| All Items Less Food and Energy | 0.4 | 0.2 | 0.1 | 0.2 | 0.1 | 0.2 | 0.3 | 3.1 |
| Commodities Less Food and Energy | 0.3 | 0.2 | -0.1 | 0.1 | 0.0 | 0.2 | 0.2 | 1.2 |
| New vehicles | 0.0 | -0.1 | 0.1 | 0.0 | -0.3 | -0.3 | 0.0 | 0.4 |
| Used cars and trucks | 2.2 | 0.9 | -0.7 | -0.5 | -0.5 | -0.7 | 0.5 | 4.8 |
| Apparel | -1.4 | 0.6 | 0.4 | -0.2 | -0.4 | 0.4 | 0.1 | -0.2 |
| Medical care commodities | 1.2 | 0.1 | -1.1 | 0.4 | 0.6 | 0.1 | 0.1 | 0.1 |
| Services less energy services | 0.5 | 0.3 | 0.1 | 0.3 | 0.2 | 0.3 | 0.4 | 3.6 |
| Shelter | 0.4 | 0.3 | 0.2 | 0.3 | 0.3 | 0.2 | 0.2 | 3.7 |
| Transportation services | 1.8 | -0.8 | -1.4 | 0.1 | -0.2 | 0.2 | 0.8 | 3.5 |
| Medical care services | 0.0 | 0.3 | 0.5 | 0.5 | 0.2 | 0.6 | 0.8 | 4.3 |
| *Ended July 2025 Source: Consumer Price Index Summary, U.S. Bureau of Labor Statistics (BLS) | ||||||||
References
Bureau of Labor Statistics. “Consumer Price Index Summary.” Economic News Release. Published August 2025.
Ribera, Luis, and Landyn Young. “How is the Consumer Price Index Impacted by Trade Talks.” Southern Ag Today 5(34.4). August 21, 2025. Permalink
Leave a Reply