Consumers fear inflation as tariffs hit home: Federal Reserve report

It’s time to spill the tea.

Yorkshire Gold, to be frank.

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Produced and packaged in the UK, it is the morning libation of choice to please my Anglophile taste buds.

And because of the new U.S. tariffs shaking up the global world economy, I just ordered 320 tea bags on Amazon to delay paying a highly probable price increase.

I’m not the only hot mess steeping with tariff inflation anxiety.

Related: A divided Federal Reserve mulls interest rate cut after wild week

The Federal Reserve Bank of New York’s Center for Microeconomic Data released the July 2025 Survey of Consumer Expectations on Aug. 7.

It shows that U.S. households’ inflation expectations are creeping up.

Tariffs tilt consumer price expectations

Tariffs are a levy or external tax on products and services.

President Donald Trump’s off-and-on tariffs hit more than 60 trading partners on Aug. 7, with more to be determined.

The Yale Budget Lab estimates the average effective tariff rate is 18.3%, the highest since 1934.

Some of the proposed tariffs are as high as 50% for countries such as Brazil, which supplies most of the coffee consumed in the United States.

The Trump administration expects the new tariff levels to bring billions of dollars into the U.S. Treasury.

Much of that revenue has been absorbed by exporters, importers, and businesses since the Liberation Day announcement on April 2.

Many economists expect the tariff impacts will now start to trickle down the supply chain and into the prices paid by consumers.

It remains to be determined if the tariff experiment will result in a one-time inflationary shock to the economy or will be felt for longer periods.

How the Federal Reserve monitors inflation

Maximum employment and low inflation with price stability are the Federal Reserve’s dual mandate from Congress.

The Fed uses interest rates as the benchmark tool to comply with its mandate.

Its goals create tension for the independent central bank’s task of executing monetary policy.

That’s because:

President Trump has been highly critical of Fed Chair Jerome Powell and the 12-member Federal Open Market Committee for keeping interest rates steady at 4.25 to 4.50% in part due to potential tariff inflation.