Bad news for mortgage rates: Trump’s trade war has started to drive up inflation

Consumers had dodged any inflationary impact from the trade war initiated by President Donald Trump this year, but that’s started to change.

According to the monthly report from the U.S. Bureau of Labor Statistics (BLS), the Consumer Price Index for June rose 2.7% year over year and 0.3% on a monthly basis. The annual pace is higher than the 2.4% registered in May.

Core inflation — which removes volatile food and energy costs — rose 2.9% annually. The rise in shelter costs continues to cool, however, registering a 3.8% rise year over year. The pace of inflation for shelter has decreased every month since August 2024.

The report is a blow to the real estate industry, which has been choked by high mortgage rates. Federal Reserve Chairman Jerome Powell has taken a cautious approach to an interest rate cut, often citing the potential for Trump’s tariffs to reignite inflation.

“Today’s inflation report is not good news for the housing market,” said Bright MLS Economist Lisa Sturtevant in a statement. “While the headline inflation number gets most of the attention, it is the price data for specific sectors that will give us an indication that tariffs and announcements about tariffs are having an impact on inflation.

“Prices of household furnishings and appliances, toys and computers were up sharply in June, and apparel prices also rose faster than average. A Fed rate cut is now very unlikely in July and prospective homebuyers are increasingly feeling the financial stress of higher prices for everyday things which makes it harder to think about buying a home,” Sturtevant said.

Sagent CEO Geno Paluso said in a statement: “June Core CPI rose less than expected for the fifth straight month, which may lower rates and provide refi retention opportunities for mortgage servicers short-term, but Sagent must keep servicers ready for any market outcome because rates can rise just as quickly in this volatile era, plus homeowner hardships could emerge during hurricane season in the coming months.”

News on potential tariffs had slowly died down since Trump paused the global tariff regime he announced on April 2, but he’s revived the issue with a series of announcements that have put the economy back on edge.

In July, a number of countries were targeted for new — and very high — tariffs. Those include Russia, Canada, Mexico, the European Union, Japan, South Korea, South Africa, Myanmar, Laos, Kazakhstan and Malaysia. Trump also singled out some imported goods, including a 50% tariff on imported copper.

The global tariffs announced on April 2 remain paused until Aug. 1.

Powell’s wait-and-see approach to rate cuts has frustrated Trump, who has levied a series of threats against him and called for his resignation. Powell has given no signal that he’s considering resigning.