Tariffs and AI Fuel US Inflation Surge
The Minneapolis Fed's latest analysis reveals that US inflation is being driven by two distinct factors: tariffs imposed during the Trump administration and the growing demand for artificial intelligence hardware.
Researchers found that tariffs added between 0.2 and 0.4 percentage points to core inflation as of July 2026, while AI-related demand for memory and computer hardware contributed a comparable amount, roughly 0.4 percentage points, through its impact on video and information processing equipment prices.
The study suggests that even without tariffs, core Personal Consumption Expenditures (PCE) inflation would still be running about one percentage point above the central bank's 2% objective.
Core PCE inflation reached 3.3% year over year through July, marking the highest reading since 2023 and the early 1990s.