Associated Press Economics Writer Paul Wiseman
WASHINGTON (AP) – US wholesale prices fell last month with another indication that inflationary pressures are easing. But President Donald Trump’s trade war clouds the outlook as new punishing tariffs have been announced by Beijing and Washington.
Producer price index tracks inflation before hitting consumers, but it has fallen 0.4% from its first decline since October 2023, the Labor Department said on Friday. Compared to a year ago, producer prices rose 2.7% from a 3.2% increase in February from a 3.2% year-on-year increase, with 3.3% economists much lower than expected. Gasoline prices have fallen 11.1% since February, while egg prices, which have skyrocketed due to the avian flu, plummeted 21.3%.
Excluding unstable food and energy prices, the so-called core wholesale inflation rate has fallen 0.1% from February, the first decline since July. Compared to a year ago, the price of core producers rose 3.3%, lower than economists had predicted.
The report comes the day after the Labor Bureau issued good news about inflation at the consumer level. The consumer price index has grown just 2.4% since last month in March 2024, making its lowest profit year-over-year since September. Core consumer prices recorded the lowest year-over-year increase in nearly four years.
The outlook for inflation is muddy due to Trump’s trade war. He has levied a 145% tax (customer duties) on Chinese imports, striking the majority of the rest of the world’s imports with a 10% collection that could rise in 90 days.
On Wednesday, China retaliated once again, and announced it would raise tariffs on US goods from 84% to 125%. This is the latest salvo in the escalation of a trade war between the two largest economies of the world that rattled the market and caused the fear of slowing the world.
Trade barriers are widely expected to raise prices when importers try to pass on higher costs.
The inflation numbers offered this week are better than economists expect, but retaliatory trade measures launched by both the US and China will likely cool the trend, said Carl Weinberg, chief economist in high frequency economics.
“This good news won’t last that long,” Weinberg wrote Friday. “Taxes will raise the price of inputs for all imported producers, namely (not yet service), and in April data, released on May 15th, we can see the impact of the tariffs.
Major US companies are already branching out due to potential damage. Walmart stirred up expectations for operating profit in the first quarter, and Delta retracted its annual financial expectations.
The companies announced changes this week, but stocks in major retailers such as Target and Macy’s have been falling sharply since the start of the year. Delta, the country’s most profitable airline, saw a 35% decline in 2025.
Weinberg said the new inflation data will arrive in mid-May, a week after the US Federal Reserve meets and discusses interest rates. These arguments are made even more difficult given the restraint of the global trade order.
The challenges that Chairman Jerome Powell and the Fed are currently facing were revealed this week in minutes released this week from the Fed’s latest meeting.
Minutes from the February meeting suggest that the Fed can avoid changing benchmark interest rates if inflation rates rise or if growth slows and unemployment starts to rise.
But if both happen simultaneously, the Fed could “face difficult trade-offs,” said some 19 officials on the central bank’s interest rate setting committee. Typically, if the Fed cuts critical rates to support and stimulate the economy with more borrowing and spending, an increase in unemployment could lead to a recession. But Fed officials may be reluctant to cut back if inflation rises. Because it usually tries to cool the higher prices by changing the key rate, or even raises them if necessary.
AP Economics Writer Christopher Al Gerber contributed to this report from Washington.
Original issue: April 11, 2025 9:51am EDT
