(Reuters) - Australia's biggest non-food retailer Wesfarmers ( WFAFF ) said it may raise prices as a soft local dollar drives up supply costs and warned on Thursday that tariffs ordered by U.S. President Donald Trump may spur inflation.

The owner of Australia's biggest hardware chain, Bunnings, and budget department store chain Kmart also said the country's first interest rate cut in five years, announced this week, would help households but alone could not end high living costs nor offset wide-ranging geopolitical headwinds.

"You just need to look at some of the challenges in the housing sector that are fairly well understood and reported," Wesfarmers ( WFAFF ) CEO Rob Scott told journalists. "These are not going away quickly."

The assessment brought a cautious tone to an otherwise well-received trading update in which the Perth-based conglomerate said first-half profit rose slightly more than analysts forecast on resilient demand at Bunnings and a surge in popularity with cost-conscious shoppers at Kmart.

Wesfarmers ( WFAFF ) shares were 3% higher by midsession in a weaker broader market.

None of Wesfarmers' ( WFAFF ) businesses, which include a lithium project and industrial chemicals, appeared directly vulnerable to wide-ranging tariffs that Trump has promised, but "there are always the second order impacts", Scott said.

"Clearly tariffs can be inflationary and can inhibit economic growth."

A weaker Australian dollar, which economists have put partly down to concern about tariffs, would push up the cost of foreign-sourced supplies by mid-2025. Wesfarmers ( WFAFF ) would "try and find ways to mitigate those cost pressures ... and it may well be that we can mitigate some of those so the prices don't have to go up as much", Scott said.

Net profit was A$1.47 billion ($932.13 million) for the six months to December, slightly ahead of a Visible Alpha consensus estimate of A$1.45 billion and the previous year's A$1.43 billion, helped by a 3.1% increase in pre-tax profit at Bunnings, the company's main earner.

Jefferies analysts called the update a "solid result with sales remaining relatively resilient and productivity measures continuing to offset cost pressures".

Wesfarmers ( WFAFF ) reiterated its forecast that a lithium joint venture with Chile's SQM would start producing battery-grade lithium hydroxide in mid-2025. On the call, Scott said the project would be profitable even after a slide in the lithium price but "clearly if there were improvements in the future in price, then that would be beneficial".

The conglomerate declared an interim dividend of A$0.95 per share, up from last year's A$0.91.

($1 = 1.5770 Australian dollars)