Businesses are charging each other higher prices, a warning sign for consumers

Authors: Rob Wile

Publisher:

NBC News

Published: 8/14/2025

Language:English

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Aura Windfall

Good morning norristong_x, I'm Aura Windfall, and this is Goose Pod for you. Today is Sunday, August 24th. We're diving into a topic that touches the very core of our financial well-being: businesses are charging each other higher prices, a serious warning sign for all of us as consumers.

Mask

I'm Mask. We're here to dissect what this really means. It's not just numbers on a spreadsheet; it's a fundamental shift in the economic landscape. The pressure is building in the pipeline, and it's heading straight for the consumer's wallet. We'll explore if this is a necessary evil or a catastrophic misstep.

Aura Windfall

Let's get started with the heart of the matter. The latest inflation data is sending some truly concerning signals. What I know for sure is that when businesses start charging each other more, it’s only a matter of time before we feel that ripple effect in our own lives.

Mask

It's not a ripple; it's a shockwave. The Bureau of Labor Statistics reported that wholesale inflation surged in July. The engine behind this is a category called 'trade services,' which reflects how much more wholesalers are tacking on to their costs. It’s about preserving margins, pure and simple.

Aura Windfall

And that surge was significant, wasn't it? A 6.9% increase on the year in July. That's the largest jump we've seen since the early days of the pandemic-era inflation. It feels like we're stepping back into a period of economic uncertainty that many hoped was behind us. What does this mean for our collective spirit?

Mask

It means businesses are done absorbing the costs of tariffs. They've shouldered the burden, and now they're passing the buck. As one economist put it, businesses were hesitant to raise consumer prices last month, but the prices they charge each other are rising much faster. It's a strategic move.

Aura Windfall

So, there's a disconnect between the wholesale prices and what we're currently seeing on the shelves. The consumer inflation report seemed a bit more subdued, which might give people a false sense of security. But this new report suggests the calm won't last long, does it?

Mask

Exactly. The Producer Price Index, or PPI, is the canary in the coal mine. One analyst called the spike an 'unwelcome surprise' and said it shows inflation is coursing through the economy, even if it hasn't fully hit consumers yet. Optimism for a Fed rate cut is evaporating because of this.

Aura Windfall

And we're already seeing this play out with major retailers. I saw that Home Depot is planning to raise some prices specifically because of these tariffs. It’s becoming tangible now; it’s not just an abstract economic indicator anymore. This is where policy meets the people.

Mask

Walmart too. They're raising prices, and the fascinating part is that, for now, customers are still shopping there. It tests the limits of consumer loyalty and price elasticity. How much of a price hike are people willing to tolerate before they fundamentally change their behavior? That's the billion-dollar question.

Aura Windfall

It truly is. We're not just talking about a few cents here and there. Prices on apparel wholesaling climbed 5%, and the category for apparel, jewelry, footwear, and accessories retailing spiked by 8%. These are significant jumps that will be noticed. It makes you question the purpose of it all.

Mask

The purpose is disruption. It's a high-stakes negotiation. A Harvard professor noted that a 9% price impact from tariffs 'doesn't sound outrageous.' We're in the middle of a fundamental repricing of goods. This is the cost of reshaping global trade. It's painful, but from a certain perspective, it's necessary.

Aura Windfall

That's a powerful perspective. To truly understand this moment, I feel we need to look back. This isn't the first time our nation has navigated these turbulent waters of tariffs and trade. What is the truth of our history with them? How did we get to a place where this is our reality?

Mask

It’s a long and cyclical history. In the beginning, from 1789, tariffs were the primary revenue source for the federal government. Forget income tax; tariffs paid the bills, accounting for up to 95% of federal income until 1860. It was a practical way to fund the nation's growth.

Aura Windfall

So it was originally about funding the government, not necessarily about protecting industries. That’s a fascinating distinction. It was a tool for building, not a weapon for fighting. When did that purpose begin to shift? When did it become more about protectionism?

Mask

The shift was gradual, but the tension was always there. Alexander Hamilton's 'Report on Manufactures' in 1791 pushed for promoting domestic industry. But the real turning point was the 'Tariff of Abominations' in 1828. It raised rates so high it sparked a crisis with Southern states that relied on imports.

Aura Windfall

The 'Tariff of Abominations'—what a name. It speaks volumes about the conflict it created. It highlights the deep economic divisions within the country even back then. It seems we've been debating the right balance between revenue, protection, and free trade for centuries. It's a core part of our economic DNA.

Mask

Precisely. After that, we entered what historians call the 'Restriction Period' from the Civil War until 1933. The Republican party, backed by Northern industrial interests, favored high protective tariffs, sometimes as high as 50%. This was the era of the McKinley Tariff and the infamous Smoot-Hawley Tariff in 1930.

Aura Windfall

And Smoot-Hawley is often cited as a policy that deepened the Great Depression, isn't it? A cautionary tale about the unintended consequences of trying to protect your own economy in isolation, without considering the global reaction. A lesson in interconnectedness we seem to be relearning.

Mask

It's the ultimate case study in disastrous economic policy. It provoked massive international retaliation and strangled global trade. That colossal failure led to a complete reversal. The Reciprocal Tariff Act of 1934 began the modern era of trade liberalization, leading to agreements like GATT and the WTO. The goal became minimizing tariffs.

Aura Windfall

And that policy dominated for the better part of a century. It’s what my generation grew up with—the idea that free trade and lower barriers were the path to global prosperity. Now, the pendulum seems to be swinging back with incredible force. Why the dramatic reversal now? What is the perceived need?

Mask

The 'China Shock.' After China joined the WTO in 2000, the U.S. saw a massive loss of manufacturing jobs. The consensus on free trade fractured. The current administration's strategy is a direct response to that, using tariffs as a tool, or a weapon, to reshore jobs and rebalance trade deficits.

Aura Windfall

So, it's a return to a much older playbook. The article mentions that today, about 70% of products enter the U.S. duty-free, and tariffs account for less than 2% of federal revenue. These new tariffs represent a fundamental break from 70 years of policy. It’s a paradigm shift.

Mask

It's a radical reset. And it has a huge impact on investment. A 25% tariff could increase the price of investment goods by nearly 10%. This isn't just about the price of T-shirts; it affects the cost for businesses to expand and innovate. It's a calculated risk with massive implications.

Aura Windfall

It seems like such a double-edged sword. The article quoted someone saying tariffs can be a powerful negotiating tool on one hand, but on the other, they raise costs for everyone. It feels like a high-stakes gamble with our economic stability and the well-being of families. There must be a better way.

Mask

'Better' is subjective. The goal is to change the status quo. President Trump has even floated using the revenue to fund a U.S. sovereign wealth fund. It's about using tariffs not just for protection, but as a source of capital to fuel national initiatives. It's audacious, to say the least.

Aura Windfall

Audacious is one word for it. Another might be perilous. The recent wave of tariffs has created what the text called 'radical uncertainty' for businesses. It’s not just about paying more for goods; it’s about the inability to plan for the future. How can a business thrive in chaos?

Mask

Some businesses thrive in chaos. It's disruptive innovation on a national scale. The U.S. weighted-average tariff rate has skyrocketed from around 2% to over 20% in a matter of months. This forces companies to rethink everything—their supply chains, their cost structures, their competitive advantages. It weeds out the complacent.

Aura Windfall

But at what cost? The administration says this is about reinforcing national security and boosting U.S. manufacturing. I understand the spirit behind wanting to bring jobs back home. The idea that one manufacturing job can create seven to twelve other jobs is incredibly hopeful. But is this the right path to that goal?

Mask

It's a path. The old path led to shuttered factories. This is a deliberate attempt to reverse that by making domestic production more competitive. It's also about balancing trade relationships and fighting back against countries that have used their own tariffs and barriers against us for years. It's economic hardball.

Aura Windfall

And it’s creating headwinds. J.P. Morgan's research says these tariffs will weigh on growth. We're seeing consumer sentiment decline as people anticipate higher prices. There's a real fear spreading, and it’s not just political anymore; it's becoming a widespread concern about jobs and the cost of living. That affects everyone's peace of mind.

Mask

Fear is a motivator. But so is strength. The average effective U.S. tariff rate is now estimated at 15.8%. That's a massive increase from 2.3% at the end of 2024. This isn't a minor adjustment; it's a structural change. Other countries are responding, with China imposing its own tariffs. This is a global renegotiation.

Aura Windfall

And that renegotiation has a direct impact on us. At the end of the day, as one economist said, tariffs are a tax on imports, and the cost nearly always falls on domestic sellers and consumers, not foreign producers. So when we talk about this conflict, we're really talking about a new tax on the American people.

Mask

Or an investment in a different future. The goal is to break the dependency on foreign manufacturing for critical goods. Look at the priority areas: automotives, batteries, microelectronics, pharmaceuticals. The administration sees this as a necessary cost to regain sovereignty over our own economic destiny. Short-term pain for long-term strategic advantage.

Aura Windfall

Let's talk more about that pain, because the impact is being felt right now. The July Producer Price Index data is showing a reacceleration of inflation. This isn't a distant threat; it’s a present reality. What does this mean for the Federal Reserve and its mission to create stability for families?

Mask

It means the Fed is in a box. The PPI for final demand jumped 0.9% in July, the biggest rise in over two years. Annually, it's up 3.3%. Over 75% of that came from services. This data essentially forces the Fed's hand. They can't aggressively cut interest rates when inflation is re-igniting.

Aura Windfall

So, even if the economy feels like it's slowing down, the very tool that could help—lowering interest rates—is being kept off the table because of this inflation. One economist said the report is good news because it's not deflation, but it means the Fed doesn't have to rush to bring rate cuts forward. That offers little comfort.

Mask

Comfort is irrelevant. The data is the data. The core PPI, which strips out volatile food and energy, also showed persistent pressure. The market has to price this in. It signals a need for caution. This is the consequence of the tariff policy. It's inflationary by nature, and now we're seeing the proof.

Aura Windfall

And it seems the market is getting the message. The 'hot measure of inflation at the wholesale level' has led traders to increase their bets on future rate cuts, but some economists are skeptical. They see rising services inflation and the potential for tariffs to keep boosting prices. It's a confusing picture.

Mask

It's only confusing if you expect a simple answer. The economy is a complex system. St. Louis Fed President Alberto Musalem said a half-point rate cut is not warranted with inflation running above the 2% target and businesses adapting to higher import taxes. The Fed has to maintain its credibility.

Aura Windfall

What I know for sure is that this complexity translates to anxiety for everyday people. When you hear about inflation, tariffs, and interest rates, it can feel overwhelming. The real impact is on family budgets, on the ability to save for the future, and on the simple dream of a stable life.

Aura Windfall

So, looking ahead, where do we find hope? What does the future hold? The consensus seems to be building that the Federal Reserve will have to act in September. What is the most likely path forward to bring some relief?

Mask

The most likely path, according to J.P. Morgan and market sentiment, is a 25 basis-point interest rate cut at the September meeting. Traders are pricing in an 89.2% probability of a cut. The labor market is showing signs of weakness, and that's the trigger. The Fed is finally pivoting.

Aura Windfall

A rate cut would certainly be welcome news for many. It might ease borrowing costs and signal that the Fed is focused on supporting the economy. But is one small cut enough to counteract the inflationary pressures we've been discussing? Or is it just the beginning of a longer journey?

Mask

It's the beginning. The view is this will be the first of several cuts over the next six months. By the end of the year, we could expect at least two. But it all depends on the data. A strong jobs report could make them hold, while a soft one could even lead to a 50 basis-point cut.

Aura Windfall

That's a lot of uncertainty still. It feels like we're walking a tightrope. The fate of the economy hangs on the next jobs report and the next inflation reading. It underscores how interconnected everything is, and how much we rely on wise, thoughtful leadership to navigate these challenges with grace.

Aura Windfall

That's the end of today's discussion. What I know for sure is that understanding these forces is the first step toward empowerment. Thank you for listening to Goose Pod. We hope this conversation brought some clarity and truth to your day.

Mask

Clarity is key. The economic machine is complex, but its effects are simple. They land in your wallet. Stay informed, stay vigilant. We'll see you tomorrow.

## Businesses Raise Inter-Company Prices Amidst Tariffs, Signaling Potential Consumer Cost Increases **News Title:** Businesses are charging each other higher prices, a warning sign for consumers **Publisher:** NBC News **Author:** Rob Wile **Date/Time Period Covered:** July data, with forward-looking analysis for the rest of the year and upcoming Fed decisions. ### Key Findings and Conclusions: * **Wholesale Inflation Surge:** Fresh data from the Bureau of Labor Statistics (BLS) indicates a significant surge in wholesale inflation in July, driven by businesses raising the prices they charge each other for goods and services. * **Profit Margin Preservation:** This price increase is interpreted as a strategy by businesses to preserve their profit margins in response to President Donald Trump's tariffs. * **Potential Consumer Impact:** The trend suggests that consumers may eventually bear the brunt of these increased costs. * **Doubt on Fed Rate Cuts:** The elevated wholesale inflation data casts doubt on the Federal Reserve's likelihood of adjusting interest rates for the remainder of the year. Stocks reacted negatively to this news, with investors scaling back expectations for Fed rate cuts. * **Contrast with Consumer Inflation:** This report contrasts with a more subdued consumer inflation picture reported earlier in the week. However, analysts believe consumers will not remain unaffected for long. ### Key Statistics and Metrics: * **Trade Services Category:** This category, reflecting how much more wholesalers charge above initial costs to maintain or increase earnings, increased by **6.9% on the year in July**. * **Largest Gain Since March 2022:** This 6.9% increase represents the largest gain in the trade services category since March 2022, when pandemic-era inflation began to escalate. * **Consumer Tariff Burden:** A previous report suggested consumers are currently paying approximately **22%** of the cost of Trump's tariffs, with a forecast that this figure could rise to as much as **67%** by the end of the year. * Goldman economist David Mericle defended these estimates, stating that if recent tariffs follow the pattern of earlier ones, consumers could bear about **two-thirds of the cost** by the fall. ### Notable Risks or Concerns: * **Inflationary Pressure:** The large spike in the Producer Price Index (PPI) indicates that inflation is permeating the economy, even if consumers haven't fully experienced it yet. * **Unwelcome Surprise for Fed:** The high PPI number is considered an "unwelcome surprise" that could diminish optimism for a "guaranteed" rate cut in the near future. * **Tariff Cost Absorption:** The administration's belief that foreign manufacturers will absorb tariff costs by accepting lower prices to maintain market share is being tested by upcoming import price data. * **Unemployment Claims:** The Labor Department also reported that unemployment claims remain elevated, though they have declined from the previous week. ### Important Recommendations/Expert Opinions: * **Bill Adams (Chief Economist, Comerica Bank):** * "Businesses were hesitant to raise prices charged to consumers last month, but the prices they charge each other are rising faster, with big increases touching many categories of goods and services." * The July PPI data is "a pebble on the scale against a rate cut at the Fed’s next decision in September." * However, "the upcoming jobs data will weigh more heavily in the Fed’s decision making than this inflation report." * **Chris Zaccarelli (Chief Investment Officer, Northlight Asset Management):** * The "large spike in the Producer Price Index (PPI) this morning shows inflation is coursing through the economy, even if it hasn’t been felt by consumers yet." * He called the high PPI number an "unwelcome surprise" that is "likely to unwind some of the optimism of a ‘guaranteed’ rate cut next month." * **Samuel Tombs (Head of U.S. Economics, Pantheon Macroeconomics):** * Believes the jump in the trade services category is likely to be revised lower in subsequent reports. * Suggests other aspects of the data are too volatile for definitive conclusions. * Stated, "The tariffs are continuing to create cost pressures … but July’s PPI data overstate the intensity." * **James Knightley (Chief International Economist, ING):** * Notes the administration's belief that foreign manufacturers will "pay" much of the tariff by accepting lower prices to maintain market share. * Anticipates Friday's import price data will be an "interesting test." ### Material Financial Data: * **Producer Price Index (PPI):** The core focus of the report, indicating price changes at the wholesale level. * **Trade Services Category:** A key driver of the PPI increase, showing a **6.9% year-over-year rise in July**. * **Consumer Inflation Report:** Contrasted with the PPI, showing a "somewhat more subdued price growth picture." * **Stock Market Reaction:** Stocks were lower on Thursday as investors adjusted their expectations for Fed rate cuts. ### Upcoming Data: * **Import Price Data for July (BLS):** Scheduled for release on Friday, this data will provide further insight into how tariff costs are being absorbed. * **September Jobs Report (BLS):** Economists are closely watching this report, as it will heavily influence the Fed's decision-making. The BLS data has faced criticism from President Trump, and his nominee to head the agency, E.J. Antoni, awaits Senate confirmation.

Read original at NBC News →

Fresh inflation data suggests businesses have begun to raise the prices they charge each other for goods and services, a sign they are looking to preserve their profit margins in the face of President Donald Trump’s tariffs — with consumers potentially footing the bill.The Bureau of Labor Statistics said Thursday that wholesale inflation surged in July, with the increases led by a category called trade services.

Those reflect how much more wholesalers charge above initial costs to maintain or even increase their earnings rate. The category increased 6.9% on the year in July, the largest gain since March 2022, when pandemic-era inflation began to soar.“Businesses were hesitant to raise prices charged to consumers last month, but the prices they charge each other are rising faster, with big increases touching many categories of goods and services,” Bill Adams, chief economist at Comerica Bank, said in a note.

Thursday’s report stands in contrast to the consumer inflation report published this week that showed a somewhat more subdued price growth picture. Analysts say the latest report on the costs that businesses are facing suggests consumers won’t be left unscathed for long — and throws some doubt on whether the Federal Reserve will adjust interest rates for the rest of the year, and, if so, how.

Stocks were lower in trading Thursday as investors dialed back expectations for Fed rate cuts. When inflation is hot, the Fed tends to keep interest rates elevated to curb overall economic activity. “The large spike in the Producer Price Index (PPI) this morning shows inflation is coursing through the economy, even if it hasn’t been felt by consumers yet,” Chris Zaccarelli, chief investment officer for Northlight Asset Management, said in a note.

He called the high PPI number an “unwelcome surprise” that is “likely to unwind some of the optimism of a ‘guaranteed’ rate cut next month.”A report this week suggested that while consumers are so far only paying approximately 22% of the cost of Trump’s tariffs, the figure is likely to rise to as much as 67% by the end of the year.

Trump has disputed that forecast but, on Wednesday, a Goldman economist defended its estimates.“If the most recent tariffs, like the April tariff, follow the same pattern that we’ve seen with those earliest February tariffs, then eventually, by the fall, we estimate that consumers would bear about two-thirds of the cost,” David Mericle said Wednesday on CNBC’s “Squawk on the Street.

” Some analysts were more sanguine about the report. Samuel Tombs, head of U.S. economics at Pantheon Macroeconomics, said the jump in the trade services category is likely to be revised lower in subsequent reports, while other aspects of the latest data are too volatile from which to draw conclusions.

“The tariffs are continuing to create cost pressures … but July’s PPI data overstate the intensity,” he wrote on X. On Friday, the BLS will publish import price data for July, which will provide further insight into how tariffs costs are being absorbed. “The administration believes that foreign manufacturers will ‘pay’ much of the tariff by accepting lower prices in order to maintain market share,” James Knightley, chief international economist at ING, said in a note.

“Tomorrow will be an interesting test.”The Labor Department also reported Thursday that unemployment claims remain elevated, though they declined compared to the previous week. Economists are now zeroing in on September’s jobs report from the Bureau of Labor Statistics, whose data has come under fire by Trump.

His nominee, E.J. Antoni, whom he selected to head the agency after he fired its previous commissioner, Erika McEntarfer, must still be confirmed by the U.S. Senate.Ultimately, Thursday’s inflation report “is a pebble on the scale against a rate cut at the Fed’s next decision in September,” Comerica’s Adams wrote.

“Even so, the upcoming jobs data will weigh more heavily in the Fed’s decision making than this inflation report.”Rob WileRob Wile is a Pulitzer Prize-winning journalist covering breaking business stories for NBCNews.com.

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