Annual inflation in the United States cooled for the third consecutive month in April, even after some of President Donald Trump’s tariffs took effect.
- The report suggests that tariffs have not yet impacted the prices of many items.
- His massive 145% tariffs on Chinese imports were reduced to 30% in a deal announced Monday.
- Consumer prices cooled notably in February and March, leading Trump to repeatedly claim on social media that “THERE IS NO INFLATION.”
Consumer prices rose 2.3% in April compared to a year ago, the Labor Department said, down from March’s 2.4% and the smallest increase in over four years. On a monthly basis, prices rose modestly, increasing 0.2% from March to April after dropping 0.1% the previous month, the first decline in five years.
Grocery prices fell 0.4%, partly due to a sharp 12.7% drop in egg prices. It was the largest decline in at-home food costs since September 2020, according to the government.
The report suggests that tariffs have not yet impacted the prices of many items.
Clothing costs fell 0.2% from March to April, while new car prices remained unchanged. However, furniture costs rose 1.5%.
Excluding the volatile food and energy categories, core prices also moderated, rising 2.8% in April from a year ago, the same as in March. On a monthly basis, they increased a slight 0.2%. Economists watch core prices because they typically provide a better sense of where prices are headed.
Trump has also imposed 25% tariffs on nearly all steel and aluminum imports, as well as the universal 10% tariff he announced on April 2, which took effect a few days later.
His massive 145% tariffs on Chinese imports were reduced to 30% in a deal announced Monday.
Still, economists say that average tariffs are now around 18%, roughly six times higher than before Trump took office and the highest in about 90 years.
It will likely take more time before the full impact of tariffs is reflected in U.S. business prices, economists say. Items already in transit when tariffs were imposed won’t be subject to them, while many companies have stockpiled goods and may delay price hikes in hopes that tariffs will ultimately be reduced.
Still, some companies have raised prices, and others have said they plan to do so as a result of tariffs. Mattel Inc., maker of Barbie dolls and Hot Wheels cars, said earlier this month it would have to raise prices on some products to offset tariffs. The company manufactures 40% of its products in China.
Stanley Black & Decker, the tool manufacturer, said it raised prices in April and plans to do so again in the July-September quarter due to higher tariffs. And executives at Procter & Gamble, the consumer goods giant behind brands like Crest toothpaste, Tide detergent, and Charmin toilet paper, said last month they will likely pass higher costs to consumers as early as July.
Consumer prices cooled notably in February and March, leading Trump to repeatedly claim on social media that “THERE IS NO INFLATION.”
Inflation has fallen to nearly the Federal Reserve’s 2% target, the central bank responsible for combating rising prices.
Lower tariffs on Chinese imports will limit damage to the U.S. economy, but combined with all other tariffs, economists forecast they will still slow growth this year and worsen inflation.
The Yale Budget Lab, for example, estimates that tariffs will raise prices by 1.7% and cost the average household about $2,800 this year.
And while Trump may tout his trade deals—like the one reached with the U.K. last week—he has also said that “tariffs is the most beautiful word” in the dictionary and relies on tariff revenue to reduce the budget deficit, suggesting tariffs will likely remain high.
Tariffs have also put the Federal Reserve in an extremely difficult position, as its chair, Jerome Powell, acknowledged at a press conference last week. Powell said tariffs have increased the risk of both higher inflation and higher unemployment, two challenges that rarely occur simultaneously. If unemployment rises, the Fed would typically cut interest rates to boost the economy, while if inflation worsens, the central bank would normally raise rates or keep them elevated.
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