Economy
Fed’s fears start to be realized as tariff costs begin to hit consumers
A broad rise in prices, from coffee and audio equipment to home furnishings, pushed U.S. inflation higher in June, which economists view as a sign that the Trump administration’s escalating import tariffs are being passed on to consumers.
Overall consumer prices rose 0.3% in June, a roughly 3.5% annual rate, after a 0.1% increase in May, official data showed on Tuesday.
Economists – and Federal Reserve (Fed) officials – say they were expecting inflation to gather pace this summer as the lagged impact of tariffs gets passed along by businesses, and the June data suggest central bank policymakers in particular may remain reluctant to cut interest rates until more information is at hand.
The tariff price shock could ultimately prove a temporary, one-time adjustment. But with the final tariff levels still being considered by President Donald Trump, and steeper levies threatened as of Aug. 1, the inflation outlook remains unsettled.
The latest data “showed that tariffs are beginning to bite,” said Omair Sharif, head of Inflation Insights, “apparel prices rose, household furnishing prices jumped … and recreation commodities increased.”
Those are heavily imported items and the increases were substantial.
Prices for audio-video equipment rose 1.1% over the month and have risen 11.1% on a year-over-year basis, the largest jump ever in a category where globalization had generally meant steady or falling prices.
It will likely strike a note of caution for the Fed, which has been facing almost daily criticism from Trump for not cutting interest rates, a step central bankers have been reluctant to take until it is clear where the tariffs will leave the U.S. economy.
Yields on U.S. Treasury securities rose to their highest in about a month, and interest rate futures reflected growing uncertainty that the Fed would resume rate cuts in September, with a model from CME Group showing that decision was seen as a near toss-up after being the baseline expectation for the past month or so.
In a speech in Washington on Tuesday, Federal Reserve Bank of Boston President Susan Collins warned that she continues to expect the rise in import taxes to push up inflation while pushing down growth and employment. But she added that strong balance sheets on both the business and household sides may help absorb the hit and lessen its impact.
“The impact of tariffs may be lessened somewhat by an ability for firms to decrease profit margins and for consumers to continue spending, despite higher prices. As a result, the adverse impact of tariffs on labor market conditions and economic growth may be more limited,” Collins said.
Trump on social media said that consumer prices were “LOW” and repeated his call for the Fed to cut rates. The consumer price level was about 1.2% higher in June compared to December, the last full month before Trump started his second term.
White House Press Secretary Karoline Leavitt said the fact that core inflation, which excludes food and energy prices, increased less than expected, “proves that President Trump is stabilizing inflation.”
Core inflation increased at a 2.9% annual rate in June, slightly below the 3% consensus forecast, but slightly faster than in May. Food and energy costs both increased, pushing headline inflation up to 2.7% from 2.4% the month before.
“With increases in categories like household furnishings, recreation, and apparel, import levies are slowly filtering through,” wrote Seema Shah, Chief Global Strategist at Principal Asset Management. “It would be wise for the Fed to remain on the sidelines for a few more months at least.”
Investors still expect the Fed in September to cut a quarter of a percentage point from the current 4.25% to 4.5% benchmark interest rate maintained since December, but odds of a cut at the upcoming July 29-30 meeting are now below 5%.
Powell had earlier pinpointed this summer as the time when the U.S. central bank will learn if inflation is responding to the tariffs applied on trading partners and various industrial sectors.
So far, the levies have had only a limited impact on inflation, but economists broadly have expected to see them eventually filter into retail prices.
“We know there is a lag between implementation and the inflationary effect,” said Gregory Daco, chief economist at EY-Parthenon. “Businesses manage imports using different processes … We have not seen the full-blown effects of tariffs on CPI data … I would expect to start to see more.”
Clawing back tariff costs
The June CPI data will likely leave the Personal Consumption Expenditures Price Index the Fed uses for its 2% inflation target well above that goal, with increased uncertainty now that Trump has threatened tariff levels of 30% or more on Mexico, Canada and the European Union, and more actions are always possible.
The PCE index outside food and energy rose at a 2.7% annual rate in May; recent Fed policymaker projections see it hitting 3.1% by the end of 2025; and the most recent round of tariffs threatened by Trump for Aug. 1 could push it even higher.
The new tariff rates, “if fully passed through, would add about 0.4 percentage points to the PCE price level,” Michael Feroli, chief U.S. economist at JPMorgan, estimated. “Given imperfect pass-through, margin compression, a more likely estimate is 0.2-0.3 points. We think this bolsters the case for the Fed to take a very cautious approach to rate cuts.”
Daco said there was already “divergence” beginning across a wide swath of goods where prices are rising faster than they did before Trump’s initial rounds of tariffs.
The price of household furnishings, for example, jumped a full percentage point in June. Prices of those products had been dropping, but reversed course in the spring.
Other economists have pinpointed different items that could show where the new import taxes are starting to hit consumer prices.
Sharif, the head of Inflation Insights, said the broad category referred to as “recreational commodities,” which includes things like toys and audio and visual equipment that are often imported from China, bears watching – and rose 0.8% in June, twice as fast as in the preceding two months.
Outdoor equipment and tools are also items that are heavily imported, and while the pace of price increases had picked up in the spring, it fell back in June to 0.2% versus 0.6% in May.
Still, “tariff costs are strikingly visible in June’s CPI data,” wrote Samuel Tombs, chief U.S. economist for Pantheon Macroeconomics. Excluding autos, prices for other non-food or energy goods rose at the fastest pace since June 2022, when the Fed was still in a battle to lower pandemic-era inflation.
“Prices rose especially sharply for goods which are primarily imported,” with prices for appliances, sports equipment and toys all rising nearly 2% on the month, he said.
A joint action plan between Türkiye and Saudi Arabia to facilitate trade was signed during the World Customs Organization (WCO) Council meeting held in Brussels, according to a statement on Saturday.
The meeting was attended by Deputy Trade Minister Sezai Uçarmak, and the ministry shared the details related to it on its NSosyal account.
The statement said that Uçarmak attended the 147th and 148th Sessions of the WCO Council, which brought together the heads of customs administrations from 187 member countries and senior representatives of international organizations.
It noted that the meeting addressed key issues, including the future of global trade, data-driven customs management, artificial intelligence, e-commerce, and secure supply chains, while the organization’s work was also presented to member countries for their views.
The statement highlighted that Uçarmak held a meeting with Suhail Abnami, the governor of Saudi Arabia’s Zakat, Tax and Customs Authority, during which they had talks focused on developing road transit corridors connecting Türkiye with the Gulf region, the effective implementation of the TIR system, and facilitating regional and bilateral trade.
“Following the meeting, a Joint Action Plan was signed between our countries to accelerate the process of mutual recognition of Authorized Economic Operator (AEO) programs,” it said.
Moreover, it added that the deputy minister also held bilateral discussions with counterparts from the customs administrations of Azerbaijan, Bulgaria, Hungary, Uzbekistan, Kazakhstan, Maldives, Syria, Georgia, Kosovo, Kyrgyzstan, and Iran, during which bilateral relations were discussed.
Turkish small and medium-sized enterprises (SMEs) account for most of businesses in the country, playing a decisive role in many areas of the economy, ranging from employment to production, whether in small towns or major cities, financial officials said.
The U.N. General Assembly adopted a resolution in April 2017 to celebrate Micro-, Small and Medium-Sized Enterprises (MSMEs) Day, first observed on June 27, 2017, to underline the contributions of SMEs to the global economy and sustainable development.
This year, the special day is marked under the theme of “Empowering MSMEs through Innovation and Sustainable Industrial Development.”
The U.N. says SMEs make up for 90% of businesses worldwide and account for around 70% of employment, while contributing 50% of global gross domestic product (GDP).
Humberto Lopez, Türkiye country director at the World Bank, told Anadolu Agency (AA) on the occasion of the U.N.’s MSMEs Day that small businesses make up the backbone of the Turkish economy, accounting for 70% of total employment.
Lopez stated that implementing policies to empower SMEs is not only an economic but also a social priority, as it requires simultaneous action across many areas, where the World Bank can play an active role by combining public and private sector tools.
He noted that the bank works in public policy, institutions, guarantee mechanisms, and crisis response, while the International Finance Corporation (IFC) supports private sector investments, financial institutions, and capital markets. He said the combined approach is key to supporting a large and dynamic economy like Türkiye’s.
Lopez stated that SMEs across the globe face challenges accessing finance, including those in Türkiye, while making up a significant portion of businesses worldwide.
Initiatives in Türkiye
He said the SME financing gap in developing economies reaches trillions of dollars, and Türkiye faces a similar challenge, citing World Bank data. He advised that implementing public policies, guarantee mechanisms, a robust data infrastructure, financial inclusion, and rapid support mechanisms is significant in helping SMEs through crises.
He also noted that bank-backed initiatives in 2020-2023 injected financing into over 87,000 MSMEs in Türkiye, helping create or preserve around 115,000 jobs during the COVID-19 pandemic and after the February 2023 earthquakes in the nation’s southeast. He mentioned that 77% of new hires were workers under the age of 30 and 61% were women.
Lopez stated that some 40,000 MSMEs, especially those in disaster-stricken zones, received $450 million in post-earthquake project financing from the World Bank, as businesses in the affected region faced not only physical damage but also disruptions to market connections, access to labor, supply chains, and cash flows.
He urged SMEs to embrace digitalization, create formal and skilled jobs, and strengthen their resilience against disasters and economic shocks, as financing alone is not enough to ensure success.
At the same time, he advised small businesses operating in low-tech production, which make up a large share of SMEs in the manufacturing sector, to realize their potential for gains in productivity, digitalization, and higher value-added production.
He added that making Türkiye’s already strong SME base more efficient, resilient, and inclusive through policies boosting these areas and offering more targeted solutions for groups and regions in need of support, such as women, young people, and businesses in disaster-affected areas, will be key to sustainable growth.
Productivity, digitalization
Lisa Kaestner, division director for Türkiye, Kazakhstan, and Uzbekistan at the IFC, stated that SMEs form the base of the economy and play a key role in supply chains, local markets, exports, and digital transformation, while their growth provides benefits to suppliers, workers, customers, and local communities.
Kaestner said the right financial tools for SMEs are tied to employment and productivity, noting that the IFC’s approach in Türkiye aims to support access to financing to enable SMEs to invest, grow, and create more jobs, which she said is possible through ensuring long-term financing via banks and connecting them with markets through larger firms and value chains.
She mentioned that investing in new equipment, transitioning to digital sales, and promoting investments in energy efficiency or preparing for exports also boost efficiency, helping small businesses grow into larger and stronger ones with more resilient jobs.
Kaestner emphasized that SMEs account for over two-thirds of employment in Türkiye but received less than 27% of total bank loans as of late 2025, highlighting a mismatch between SMEs’ share of the economy and their access to financing, as Turkish small businesses continue to struggle to secure favorable maturity terms, viable collateral structures, and diverse financial products tailored to their operational needs.
She stated that the IFC is working with private banks, leasing firms, and private equity funds to develop longer-term financial products tailored to smaller businesses.
Kaestner said the IFC can mobilize private-sector financing, as reaching Turkish SMEs is most effective through financial institutions, thanks to their customer networks and capacity to develop solutions, while private equity funds can help with growth, job creation, and productivity in ways debt financing cannot.
She mentioned that the IFC provided a $350 million package for the recovery financing of small businesses in the disaster-stricken zone of the nation’s southeast through five private banks, benefiting 55,000 MSMEs, including farmers, to support businesses in reinvesting, protecting their workforce, and contributing to the local economy.
Kaestner noted that while funding can be used for a wide range of purposes, financing is needed not only for daily working capital but also for efforts such as energy efficiency, digital transformation, building export capacity, and integration into supply chains to access new markets.
She added that the IFC can support the flow of longer-term financing through private banks, leasing companies and venture capital funds, which are not easily available in the market.
Furthermore, she stated that the next priorities in SME financing in Türkiye are mobilizing more private capital and diversifying financing channels by expanding long-term financing through banks, strengthening the role of non-bank institutions such as leasing and factoring companies, providing trade and supply chain financing, and making better use of capital market instruments.
She added that women’s employment is one of the top items on the IFC’s agenda, saying that women’s participation in the workforce is 37% and that closing the gap could potentially drive a 25% increase in GDP, resulting in more investment, production and employment.
Across Asia, food vendors are contending with higher costs for plastic bags, cups and containers as the energy crisis triggered by the Middle East war drives prices up.
While the U.S. and Iran have reached a memorandum to halt the conflict, the possibility of new attacks remains. It will also take time for markets to recover and supply flows to return to normal, with persistent concerns over traffic through the economically vital Strait of Hormuz.
At Taipei’s Songjiang market, chicken vendor Li Yu-ping, 52, said in early June that the price of plastic bags had jumped nearly 60%, while the cost of plastic trays had risen by a third.
“We use them everywhere,” she said of the bags. “Our food containers are also plastic, all disposable.”
Wary of hiking prices, “all of this has become a cost for the vendors,” she said.
A key raw material for many of these plastic goods is ethylene, which is derived from naphtha, an oil by-product. Around 60% of the naphtha imported to Asia comes from the Gulf.
Faced with tight supply and soaring prices due to the monthslong closure of the Strait of Hormuz, petrochemical companies mainly in South Korea and Japan have scaled back production capacity, sending the cost of basic goods such as plastic bags surging.
In Bangkok, Nikorn Sai-inthara, a 60-year-old selling vegetables from a street cart, estimated his operating costs had risen by 30%.
“I rely on plastic bags for my work because I sell vegetables on the go to busy people and office workers,” said Nikorn, who wraps individual portions in plastic and secures them with a rubber band.
“Ever since the fighting started in the Middle East, my profits have fallen, but I don’t dare raise prices for my customers,” he told Agence France-Presse (AFP).
‘No choice’
Several vendors across the region told AFP they do not have a practical alternative to the plastic products they use on a daily basis.
“We have no choice. If you don’t give customers plastic bags, they complain,” said Chang Chiu-hsiang, a 78-year-old grocer in Taipei.
“I think you can’t really avoid using them,” added Li, the chicken vendor, noting, however, that some customers have started to use reusable bags.
Somsak Jaidee, 62, who sells rice porridge in bags secured with rubber bands at a Bangkok market, said that while “everything is more expensive … I have to endure it.”
“I can’t think of anything else that offers the same convenience for my customers as plastic bags.”
A cautious reopening of the Strait of Hormuz since the U.S.-Iran deal was signed last week has yet to fully impact naphtha prices, which have dipped only slightly.
And manufacturers continue to process naphtha purchased when prices were higher.
In early June, Taiwanese manufacturer Formosa Petrochemical reported cutting the utilization rate of its ethylene steam cracker to 35%, down from 53% in March at the very start of the war.
“At this point, the situation is not entirely due to the lack of feedstock. The bigger issue now is that the feedstock has become extremely expensive, and some of our customers simply can’t bear the higher prices,” Formosa’s president, Lin Keh-yen, told AFP.
Diversification
In South Korea, supply tensions remained acute in early June.
“Normally, if we order 10,000 plastic bags, they arrive within about a week. Now suppliers are telling us that we may have to wait more than a month” with prices 30% higher, said a shop employee in Seoul.
A nearby dry cleaner said the price of plastic garment covers had more than doubled, while a cafe owner noted a 50% increase in the cost of plastic cups.
South Korea’s plastics industry association said the Middle East war had forced manufacturers to hike prices, although “alternative” supply routes have helped stabilize the situation.
Fajar Budiyono, secretary-general of the Association of Olefin, Aromatic, Plastic and Chemical Industries in Indonesia, said a shift to suppliers in places like China and Africa has helped keep prices at bay.
In the Philippines, meanwhile, manufacturers said they had absorbed some of the additional costs.
“Our profits got squeezed. We could not simply raise prices as we would be swamped by imports,” said Steve Tavera, a member of the Philippine Plastics Industry Association.
As a result, price hikes have so far been “conservative,” he said.
The World Bank authorized some $1.1 billion in emergency funding for Bangladesh to help secure food supplies, support vulnerable households and businesses due to the rising prices of fertilizers, fuel and food from the Middle East conflict.
Bangladesh is also seeking additional external financing from development partners, including the International Monetary Fund (IMF), to shore up foreign exchange reserves and ease pressure on public finances following a surge in energy import costs and broader economic challenges.
The World Bank package comprises two projects aimed at helping the country manage external shocks and maintain economic stability.
Of the total, $300 million will be provided under the Emergency Support for Food Security Project to finance imports of 600,000 metric tons of fertilizer for the upcoming rice seasons. Bangladesh imports more than 85% of its fertilizer requirements, making it vulnerable to disruptions in global supply chains.
“Rising food, fertilizer and fuel prices stemming from the Middle East conflict, coupled with tighter fiscal space, have deeply affected Bangladesh’s economy, particularly smallholder farmers and poor and vulnerable households,” Jean Pesme, the World Bank’s division director for Bangladesh and Bhutan, said in a statement.
The project will support rice cultivation across 1.4 million hectares (3.46 million acres) of farmland.
The remaining $713 million, approved under the Contingent Emergency Response Project, will finance emergency expenditures, including cash transfers and livelihood support for affected households and small businesses.
It will also help fund fuel and energy imports needed to sustain essential services, including health care, food distribution, electricity and water supplies.
The World Bank said the financing would help Bangladesh respond rapidly to economic shocks while protecting jobs, livelihoods and critical services.
Although Türkiye and Colombia are separated by thousands of miles, they share a common ambition: to deepen bilateral ties through stronger economic cooperation. From production and trade to critical minerals and energy, both countries are committed to expanding their existing partnership and unlocking new opportunities for growth, investment and long-term collaboration.
To explore the progress made so far and the untapped potential of the Türkiye-Colombia economic partnership, Daily Sabah interviewed Carmen Caballero, president of ProColombia, the Colombian government agency responsible for promoting exports, attracting foreign investment and showcasing Colombia as a leading tourism destination.
“Within bilateral trade between the two countries, coffee has emerged as one of the key pillars,” Caballero said, adding that coffee exports to Türkiye grew by 105% between 2024 and 2025.
She noted that coffee, as Colombia’s flagship product, accounts for over 60% of its shipments to Türkiye outside the mining and energy sectors.
Despite the enthusiasm, coffee is not the only product Colombia sells to Türkiye.
Among the emerging non-mining and non-energy export categories, Caballero remarked that there has been sustained growth in fresh and processed fruit exports, as well as in manufacturing, fashion, cosmetics, pharmaceuticals and agro-industrial products. She added these exports increased from $28.5 million in 2024 to $52.8 million in 2025, representing an 85.3% rise.
Pointing to a 23.4% compound annual growth rate in these exports to Türkiye between 2022 and 2025, Caballero said the figures “reflect a deepening and increasingly diversified bilateral relationship.”
However, these products account for a smaller share of trade compared with mineral fuels and oils.
According to 2024 data from the Ankara Chamber of Industry (ASO), energy-related products accounted for 96% of Türkiye’s imports from Colombia.
The report also shows that Türkiye’s main exports to Colombia include iron and steel, machinery and electrical equipment.
The broader growth in bilateral trade was reflected in total trade volume, which reached $1.28 billion in 2024, according to the Turkish Ministry of Foreign Affairs. The ministry identifies Colombia as Türkiye’s third-largest trading partner in Latin America and the Caribbean.
Highlighting ProColombia’s role in this success, Caballero said the agency has been working to expand bilateral trade ties by strengthening cooperation with the Foreign Economic Relations Board (DEIK), chambers of commerce, industry associations, and business networks in Türkiye.
She added that ProColombia has been fostering commercial opportunities through Turkish participation in the Colombia International Business Matchmaking Forum, Colombia Travel Mart, and specialized events such as Globemeets. The agency has also been organizing familiarization trips in partnership with Turkish Airlines, particularly since the airline launched its Bogota route in May 2016.
Turkish companies have shown strong engagement through participation in business delegations and matchmaking initiatives in Colombia, she said, adding that, “Turkish investment in Colombia still has substantial growth potential, building on existing partnerships.”
With COP31 set to take place in Türkiye in November, bringing greater visibility to climate action and sustainability, Caballero said Colombia and Türkiye have significant potential to expand cooperation in renewable energy, decarbonization and clean technology through joint projects, investment and knowledge exchange. She added that, for ProColombia, this area could become a new pillar for developing future initiatives.
“The next step is to continue strengthening promotion, connectivity, commercialization and product segmentation,” she remarked, particularly in the fields of nature, culture, wellness, luxury experiences and MICE tourism.
President Recep Tayyip Erdoğan on Friday announced a fresh increase in export financing, raising the annual limit for rediscount loans to TL5 billion while unveiling a target of boosting Türkiye’s exports to distant markets to $50 billion by 2028.
Speaking at the Turkish Exporters Assembly’s (TIM) 33rd Ordinary General Assembly and Export Champions Awards Ceremony in Istanbul, Erdoğan said the government would continue supporting exporters through expanded financing as Türkiye seeks to maintain its export-driven growth.
The president said the annual limit for rediscount loans, which had previously been raised from TL300 million to TL4.5 billion, would now increase to TL5 billion with an additional TL500 million in funding.
“We had previously raised the annual limit for rediscount loans from TL300 million to TL4.5 billion. With an additional TL500 million, we are increasing this figure to TL5 billion,” Erdoğan said.
He also announced that Türkiye aims to raise exports to distant countries to $50 billion by 2028, describing the target as part of Ankara’s broader strategy to diversify export markets and sustain economic momentum.
Erdoğan noted that Türkiye has recorded uninterrupted economic growth for 23 consecutive quarters, highlighting exports as one of the key drivers of that performance.
Congratulating companies and business leaders honored during the ceremony, Erdoğan said export success requires perseverance, determination and hard work, adding that he understands the challenges faced by exporters through his own background in trade.
AK Party’s 33rd Consultation and Evaluation Meeting has been completed! “Party policies” sessions were held
Türkiye, Saudi Arabia sign action plan to ease bilateral trade
FM Fidan warns against Israeli provocations to derail US-Iran diplomacy
AK Party’s 33rd Consultation and Evaluation Meeting has been completed! “Party policies” sessions were held
Türkiye, Saudi Arabia sign action plan to ease bilateral trade
FM Fidan warns against Israeli provocations to derail US-Iran diplomacy
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