Tariffs Are Showing Up in Inflation. Why Trump Can’t Afford to Ditch Powell.

(Spencer Platt/Getty Images)

Ever had an itch you know you shouldn’t scratch? That might be how President Donald Trump is feeling as executives and members of his administration warn against firing Federal Reserve Chair Jerome Powell amid rising inflation fears.

Consumer price data for June were in line with market expectations, but still shook stock markets and sent the 30-year Treasury yield above 5% on Tuesday. The reason? Items such as furniture, toys, and clothes showed larger increases. The cost of household appliances had their biggest monthly jump since records started in 1999. It’s the first sign that tariffs are driving inflation, even with the majority of import levies currently being held at a baseline 10% amid trade talks.

At the very least that points to the Federal Reserve delaying interest-rate cuts to make sure any tariff-driven inflation is a one-off phenomenon. And that will mean Trump becoming even more frustrated with Powell, who isn’t bending to the president’s increasing pressure for borrowing rates to be brought down.

Firing Powell would be an unthinkable act for markets. Treasury Secretary Scott Bessent said Tuesday that Trump has no plan to dismiss the central bank chief in a television interview. And if the message needed any reinforcing, JPMorgan Chase CEO Jamie Dimon warned of the “adverse consequences” of meddling with the Fed in his bank’s earnings call.

But even if Trump heeds that advice, he can undermine Powell in other ways—primarily by talking up potential successors for when the Fed chair’s term ends in May next year. Bessent said Tuesday that the formal process of selecting a nominee had begun.

Over the next few months sustainability of government spending will come under further scrutiny, and tariffs will likely stifle economic growth. Trump is unlikely to get any relief from his irritation with Powell.

—Adam Clark

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Consumer Price Index Unlikely to Change July Fed Decision

June’s inflation reading shows that the progress in taming inflation has halted, and is unlikely to change the calculus of the Federal Reserve’s interest-rate policy committee heading into their July meeting. But economists expect looming higher tariffs to push inflation even higher in coming months.

• The consumer price index climbed 2.7% in June from a year ago, which was in line with economists’ consensus expectations but up from May’s 2.4% rate. Housing costs, energy, and food prices all increased. Headline inflation rose 0.3% for the month compared with May’s 0.1% gain.
• Although under typical circumstances, Fed policymakers might begin talking about potential rate cuts, Ian Lyngen, BMO Capital Markets’ head of U.S. rates strategy, said the administration’s looming Aug. 1 tariff deadline “will keep the Fed on hold for now.”
• JPMorgan Chase CEO Jamie Dimon, who often makes headlines for his economic forecasts, said Tuesday after the company beat second-quarter earnings expectations that the economy remains resilient but significant risks remain, including from tariffs and trade uncertainty and higher deficits.
• JPMorgan said credit card spending grew 7%. Consumers increased their outstanding card balances, boosting the revenue, but JPMorgan CFO Jeremy Barnum told analysts that “the consumer basically seems to be fine.”

What’s Next: The June CPI is the first of three reports—including the June personal consumption expenditures price index and July CPI—that will strongly influence policymakers’ rate decision for the September meeting. Futures markets see a 54% probability of a quarter-point cut then, according to CME FedWatch.

— Megan Leonhardt, Karishma Vanjani, and Janet H. Cho

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Trump Called It ‘Crypto Week.’ House Deals Effort a Blow.

President Donald Trump has declared this “crypto week” as lawmakers take steps to enact a piece of legislation that he champions because he says it will boost American competitiveness in digital assets. But the House dealt that effort a blow in a failed procedural vote on Tuesday.

• Instead, they voted 196 to 223 to quash a measure that would have cleared the way for votes on three cryptocurrency-related bills. A dozen Republicans joined Democrats in opposition, though another vote will be held. Trump said late Tuesday he got 11 of 12 holdouts to say yes.
• The House was hoping to get to a vote on the Trump-backed Genius Act, which creates a regulatory framework for stablecoins. It was also looking to vote on a bill to regulate the larger cryptocurrency market, and a bill to prevent the Federal Reserve from issuing a central bank digital currency.
• Trump had tried to rally Republicans in a social media post, saying they should all back the effort and touting the Genius Act as putting the U.S. “lightyears” ahead of China and Europe.
• Bitcoin, the largest cryptocurrency, has been soaring on hopes for the bills and the administration’s friendly crypto policies, though it stumbled on Tuesday after the vote, down more than 2% as of 6 p.m. Eastern time to around $117,522. It had reached a new record above $122,000 on Monday.

What’s Next: House Speaker Mike Johnson, a Louisiana Republican, told reporters after the vote that hard-liners want to put the three bills together. The Senate passed its version of the Genius Act last month. Another vote in the House will come as early as this morning, Trump said.

—Janet H. Cho and Liz Moyer

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ASML Warns on Growth Amid Global Uncertainty

Tariffs and trade deals are having a very different effect on two key chip stocks. While Nvidia scored a big win on the trade front this week, ASML is struggling. The Dutch chip equipment manufacturer said it couldn’t guarantee growth next year amid mounting macroeconomic uncertainty.

• ASML reported its second-quarter earnings Wednesday morning, which triggered an early stock selloff. While orders of 5.54 billion euros ($6.44 billion) for chip-making machines topped analysts’ targets, CEO Christophe Fouquet said he couldn’t guarantee 2026 growth, despite robust demand for artificial intelligence.
• “While we still prepare for growth in 2026, we cannot confirm it at this stage,” Fouquet said in an earnings statement. While the CEO didn’t explicitly mention tariffs, he pointed to “increasing uncertainty driven by macro-economic and geopolitical developments.”
• U.S. tariffs have made it tough for European companies to stand by past profit guidance. President Donald Trump has threatened 30% levies on the European Union from Aug. 1, and the trading bloc is preparing retaliatory tariffs.
• The profit warning came just days after Nvidia said the U.S. government has assured the company it will approve its license applications to sell its H20 chips to China. The chip maker expects to commence deliveries soon.

What’s Next: ASML also narrowed its guidance for this year. It’s now predicting sales to rise 15% to €32.5 billion, having previously forecast a range of €30 billion to €35 billion. That will raise questions about the appetite for chip manufacturers such as Taiwan Semiconductor Manufacturing and Intel to invest in the company’s next generation of lithography machines.

— George Glover

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Apple Bets on Domestic Rare-Earth Magnet Supply Chain

Apple is building its domestic supply chain for a critical component of its devices as it faces pressure from the Trump administration over its manufacturing in China. It will buy $500 million of rare-earth magnets from Las Vegas-based MP Materials, which just got a large investment from the administration.

• MP will expand the capacity of its flagship magnetics facility in Fort Worth, Texas, and supply Apple with magnets produced there using recycled material from its Mountain Pass, Calif., operation. Apple uses the magnets in iPhones and in audio equipment and microphones inside other devices.
• The agreement continues to expand on MP’s commercial momentum, according to D.A. Davidson analyst Matt J. Summerville, with Apple becoming the anchor for MP’s expansion in Texas. MP just signed a deal to supply rare earths to the Defense Department.
• China is the global leader in mining and refining the materials. Apple currently sources rare-earth magnets from Asia, including from a Chinese supplier called Baotou INST Magnetic New Materials. Trump has urged Apple and CEO Tim Cook to bring its manufacturing back to the U.S.
• The tech giant has been working to diversify its production away from China to elsewhere in Asia, including in India and Vietnam. MP is the largest producer of rare earth materials in the West but still has some of its concentrate processed in China.

What’s Next: Shipments are expected to begin in 2027, but Apple will make a $200 million prepayment as part of the multiyear deal. Apple said in April that it would spend $500 billion in the U.S. over four years.

— Nate Wolf and Janet H. Cho

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A Promising Chinese Weight Loss Drug Tests U.S. Biopharma

A weight loss shot developed by a Chinese biotech company looked almost as good as Eli Lilly’s megablockbuster Zepbound, at least according to late-stage trial results. It’s one more sign of the impending disruption that the booming Chinese biotech industry could bring to U.S. biopharma.

• China’s Hengrui Pharma and its privately held U.S. partner Kailera Therapeutics revealed that patients lost an average of 18% of their weight over 48 weeks on Hengrui’s drug, or 19% for those who completed the trial, versus Zepbound’s trial results of 21%.
• The Zepbound trial was longer, and Hengrui and Kailera say that patients were still losing weight when the Hengrui trial ended. What’s more, the latest Hengrui trial didn’t study the drug at its highest dose level, and Kailera thinks it can beat Zepbound.
• Hengrui plans to seek regulatory approval for the shot in China, but only there. Kailera has the license outside China but is still years away from U.S. approval. Its drug would likely come out after Lilly’s follow-up medicine that already works better than Zepbound.
• Still it points to the challenges that Chinese biotech is increasingly posing for U.S. biopharma, where drugmakers have spent tens of billions of dollars in recent months acquiring rights to experimental medicines invented by Chinese companies.

What’s Next: Hengrui’s drug is part of a big group of Chinese-developed weight loss assets licensed by U.S. companies. Merck has licensed an oral GLP-1 from Hansoh Pharma. AstraZeneca, Lilly, and Wegovy maker Novo Nordisk have similar deals with other companies.

— Josh Nathan-Kazis

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Dear Quentin,

I enjoy your articles and value your opinion. I am a 70-year-old retiree and married to my 66-year-old wife. Our 2025 income is $140,000 (annuity pension, Social Security and interest from a high-yield savings account). We are both on Medicare, have $1.1 million in various bank accounts and another $525,000 in a 401(k).

We don’t have any loans or long-term debt. Our house is worth $500,000 and our cars are paid off. We pay our credit cards in full every month. The children are grown up but our daughter is in medical school and will amass about $500,000 in loans when she graduates late next year (med school was not a consideration when I retired).

I would like to pay off her med-school loans so she’s not crippled with debt, but question if we have the financial security to do that and live comfortably thereafter. We don’t travel or live extravagantly. We have budgeted $90,000 to replace our two cars in the next year or so, and we want to hold on to $75,000 for wedding expenses in case our daughter ever gets married.

I use a spreadsheet to calculate income and expenses until I’m 94 years old, using a straight-line 3.5% inflation rate, 2.25% interest rate on savings and 1.5% for Social Security increases (my pension is fixed). We have also budgeted house repairs, replacement appliances, cars, etc., on a scheduled basis.

My calculations indicate we can live comfortably well into our 90s even taking a $500,000 school-loan payment into account next year. I’m worried that my financial outlook may be too optimistic, considering we only have $1.6 million in liquid assets and $140,000 in annual income, and would like to pay $500,000 in a lump sum next year.

In addition, my wife gets 75% of my pension should I predecease her, which equates to $106,000 a year in today’s dollars. Understanding that you don’t have the specifics of our ongoing expenses, I would still appreciate your general opinion on whether our finances are secure enough to pay off our daughter’s school loans and live comfortably thereafter.

— Worried Retiree

Read the Moneyist’s response here.

— Quentin Fottrell

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—Newsletter edited by Liz Moyer, Rupert Steiner, Patrick O’Donnell