‘New economic reality’: NC consumers face tariff-driven inflation

Rising inflation is starting to show up on North Carolina grocery receipts and in the state’s factories, economists and executives say.

Inflation rose last month to its highest level since February as President Donald Trump’s sweeping tariffs push up the cost of everything from groceries and clothes to furniture and appliances.

Consumer prices rose 2.7% in June from a year earlier, the Labor Department said Tuesday, up from an annual increase of 2.4% in May. On a monthly basis, prices climbed 0.3% from May to June, after rising just 0.1% the previous month.

The Consumer Price Index tracks the year-over-year changes in the cost of goods and services such as groceries, clothing and medical expenses.

The CPI shows grocery prices are up about 17.2% since January 2022. It means a $100 grocery bill back then would cost about $117 today.

John Coleman, professor at the Duke University Fuqua School of Business, said the trend of higher costs is not going away.

“If you had to make some cutbacks or some adjustments in terms of what you had to buy, what you wanted to buy, you’re going to have to continue to do that for quite some time,” Coleman said. “It’s unfortunate, but that’s just the new economic reality that we’re faced with.”

In the same timeframe, clothing has also gone up about 5.5%.

Medical costs have also increased, government data shows. Physician services are up 4.9%, for instance.

Also, it’s 6.5% more for vehicles since January 2022.

There are many factors contributing to rising costs, including consumer spending habits, supply and demand and, increasingly, tariffs passed along to consumers.

“You are starting to see scattered bits of the tariff inflation regime filter in,” said Eric Winograd, chief economist at asset management firm AllianceBernstein, who added that the cost of long-lasting goods rose last month, compared with a year ago, for the first time in about three years.

Winograd also noted that housing costs, a big inflation driver since the pandemic, have continued to cool, actually holding down broader inflation. The cost of rent rose 3.8% in June compared with a year ago, the smallest yearly increase since late 2021.

The cost of gasoline rose 1% just from May to June, while grocery prices increased 0.3%.

“About three-fourths of firms locally, in the New York area, were intending to pass some of the tariff-related costs onto consumers,” said Keenan Institute of Private Enterprise research economist Sarah Dickerson.

Retailers such as Target, Walmart and Home Depot have said they’ll pass the cost of tariffs onto their shoppers.

Trump has said the goal of the tariffs is to increase American-made manufacturing, but it will take time.

Some items got cheaper last month, including new and used cars, hotel rooms, and airfares. Travel prices have generally declined in recent months as fewer international tourists visit the U.S.

Tariffs already having an effect on NC’s economy

Daimler Truck told state officials last week that the company could temporarily lay off 573 workers at a plant near Charlotte because orders for its trucks are down. The company makes vehicles that companies like UPS use to deliver goods.

Daimler Truck executives said last week that its customers are buying fewer trucks because of uncertainty over economic policy, including tariffs.

The Trump administration has been talking about tariffs for months now. But many of them have been delayed. So far, tariffs don’t seem to have had much impact on the state’s economy.

Daimler’s layoffs could be an indicator that that’s about to change, North Carolina economist Mike Walden said.

“Whenever there’s economic uncertainty, that is not good for business,” said Walden, an N.C. State University professor emeritus.

So far, many businesses have been trying to absorb the costs of tariffs. However, the latest uptick in the inflation rate means some are beginning to pass along those costs to consumers, Walden said.

“Businesses have been trying to not do that, but they have a breaking point,” he said. “I think we’re beginning to see that breaking point.”

It also means companies may decide not to invest in business infrastructure like delivery trucks.

UNC Charlotte economist John Connaughton says a lot of the goods on our roads come from China, either directly or shipped through other countries such as Vietnam and Mexico. He said tariffs are starting to slow the flow of those products.

“One thing’s for absolute certain, and that’s going to be there’s going to be a dramatic shift in the amount of trade that we do with China, and that has been driving to a great extent the trucking industry over the past decade or two,” Connaughton told WRAL in an interview.

Coleman, the Duke professor, said demand for durable goods such as trucks is already down, and the continuing uncertainty about even more tariffs isn’t helping.

“These are things that lead people to have a wait-and-see attitude,” Coleman said. “And the wait-and-see attitude is going to affect people like Daimler in trying to sell trucks. And then it goes down from there. I mean, it’s not just trucks.”

The economists that WRAL News spoke with on Tuesday agreed that North Carolina is likely to weather the economic uncertainty better than a lot of other states because the state is not overly reliant on manufacturing, which is where tariffs are hitting the hardest, and because the state’s economy and labor market continue to be very strong.

The Associated Press contributed to this story.