The US inflation report for May, set to be released Wednesday by the Bureau of Labor Statistics (BLS), is expected to offer the clearest picture yet of whether American businesses are absorbing the costs of President Donald Trump’s renewed tariffs—or passing them on to consumers.
Economists project the Consumer Price Index (CPI) rose 0.2% last month, the same as in April, with year-over-year inflation expected to tick up to 2.5% from 2.3%. The core CPI, which excludes food and energy, is forecast to have increased 0.3% month-over-month, marking the largest monthly gain since January. Annual core inflation is anticipated to rise to 2.9% from 2.8%.
These figures will be closely scrutinized for signs that Trump’s broad import tariffs—reinstated in April as part of his “Liberation Day” trade policy—are beginning to influence consumer prices. The administration has urged US businesses to “eat” the cost of tariffs rather than raise prices. However, early indicators suggest that companies may be finding it increasingly difficult to shield customers from higher costs.
Retailers like Walmart and Best Buy have already warned of coming price increases. Walmart said it would do its best to limit price hikes but acknowledged that tighter retail margins would make that difficult. Industry data also point to mounting pricing pressure: a net 31% of small businesses surveyed by the National Federation of Independent Businesses in May said they planned to raise prices, up from 28% in April.
“Walmart’s signal that higher prices are coming highlights how businesses—large and small—are being squeezed,” said Stephen Kates, a financial analyst at Bankrate.
Data from the manufacturing sector shows similar trends. S&P Global reported the highest share of price-increase reports from US factories since late 2022, while firms in the Institute for Supply Management’s latest survey cited tariffs as a major planning challenge.
Though some of Trump’s tariffs have been eased—particularly following a May trade agreement with China—an across-the-board 10% tariff still applies to most imports. Tariffs remain in place on goods such as steel, aluminum, and autos, as well as select products from Canada and Mexico.
Economists note that the full impact of tariffs often takes several months to appear in inflation data. Historical examples, such as the 2018 washing machine tariffs, showed a delayed but eventual “rapid and complete” pass-through of costs to consumers, according to analysts at Pantheon Macroeconomics.
Federal Reserve officials are monitoring the data closely. Although inflation has cooled significantly since its 2022 peak of 9%, the Fed remains cautious. Chair Jerome Powell has acknowledged the risk of “stagflation”—a scenario in which inflation rises while economic growth slows.
For now, the Fed has held interest rates steady and is expected to do so again at its next policy meeting on June 18. Market odds suggest a 99.9% chance that the central bank will keep its benchmark rate unchanged in the 4.25%-4.50% range, according to the CME FedWatch Tool.
The May inflation report also comes amid operational challenges at the BLS. The agency has suspended CPI data collection in three US cities due to staffing constraints tied to federal workforce reductions. While the BLS maintains that national-level data remains reliable, experts have raised concerns about the granularity and coverage of future reports.
“The core CPI remains a dependable metric,” said Erica Groshen, former BLS commissioner. “But with fewer boots on the ground and a hiring freeze in place, long-term data quality at the local level could be at risk.”
