By Christopher Lugerber, Economics writer for the Associated Press
WASHINGTON (AP) — Inflation has cooled for three months in April, even after President Donald Trump’s tariffs took effect, but economists and many business owners expect it to rise in the coming months.
Consumer prices rose 2.3% in April from a year ago, the Labor Bureau said Tuesday, down from 2.4% in March, down from the smallest increase in over four years. Prices rose modestly each month, falling 0.1% in the previous month, then 0.2% in March to April, a first decline in five years.
Grocery prices fell 0.4% from March to April, saving many people growing their family budgets for the basics. The government said it was the biggest decline in food costs at home since September 2020. Egg prices fell sharply, falling 12.7%, the most in 41 years. But they are still 49% higher than a year ago.
The report suggests that tariffs have not yet affected the prices of many items. Clothing costs fell 0.2% from March to April, but prices for new cars remained the same. However, furniture costs rose 1.5%.
Excluding the volatile food and energy categories, core prices have also settled, with a 2.8% increase in April compared to the same year ago as March. Each month, they increased the mild 0.2%. Economists usually monitor core prices to provide a better reading of where prices are heading.
Only some of the early tariffs imposed by Trump came into effect in April. This includes a 25% obligation on steel and aluminum and a 25% obligation on imports from Canada and Mexico. Trump’s first 20% import tax on goods from China was also in place. Steel and aluminum operations take time to impact consumer products such as automobiles and may not affect retail prices for several months.
Trump announced the universal 10% tariff that came into effect on April 5th. His huge 145% import tax on Chinese products fell to 30% in the deal announced Monday.
Still, economists say the average tariff is now around 18%, about six times the amount before Trump took office, the highest in about 90 years.
Items that had already passed when the duties were imposed are not subject to the obligation. Many companies are building stockpiles of goods and can refrain from price increases in hopes of the trade war cool off.
Still, some companies say they are increasing prices, while others plan to do so as a result of their duties. Mattel Inc., the maker of Barbie Dolls and Hot Wheels Cars, said earlier this month that prices for some products would need to be increased to offset tariffs. The company manufactures 40% of its products in China.
Tool maker Stanley Black & Decker said he plans to raise prices in April and do so again due to high tariffs in the July-September quarter. Also, executives at Procter & Gamble, a giant of consumer products that creates well-known name brands such as Crest toothpaste, Tide detergent and Charmin toilet paper, said in July they should quickly hand over a higher price to consumers.
Consumer prices fell sharply in February and March, prompting Trump to repeatedly insist on social media that there was no inflation. Inflation has dipped to a nearly 2% target set by the Federal Reserve, the agency responsible for fighting higher prices.
Low import taxes on Chinese goods limit damage to the US economy, but combined with all other tariffs, economists predict that this year will slow growth and exacerbate inflation.
Yale Budget Lab, for example, estimates that tariffs will increase prices by 1.7%, costing the average household around $2,800 this year.
And while Trump may promote his trade deals, such as the one he reached last week with the UK – he says in his dictionary “Tax is the most beautiful word,” relying on revenue from obligations to narrow the fiscal deficit.
As Chairman Jerome Powell admitted at a press conference last week, tariffs put the Federal Reserve in a very difficult place. Powell said the job has increased the risk of both higher inflation and unemployment. When unemployment rates rise, the Fed usually cuts interest rates to boost the economy, but when inflation worsens, central banks usually raise or raise fees.
Original issue: May 13, 2025 7:35am EDT
