The story unfolds like this. U.S. consumer prices made a modest comeback in April, hovering below expectations at 2.3% for the trailing 12 months. However, we can expect inflation to surge in the coming months as tariffs hike the cost of imported goods.
According to the Labor Department’s Bureau of Labor Statistics, the consumer price index (CPI) rose by 0.2% last month. This follows a dip of 0.1% in March, marking the first decline since May 2020. The CPI’s journey to its lowest level in four years has been fueled by decreases in the prices of things like groceries and gas.
April’s data likely only encapsulates tariffs that were imposed before President Donald Trump’s April 2 “Liberation Day” announcement. Economists have suggested that the impact of these tariffs on prices will start to show its teeth beginning with May’s CPI report.
What does this mean for the average American? Tariffs, in essence, are an added cost to doing business, and more often than not, those costs are passed down to consumers.
The U.S. and China have made significant strides towards defusing their trade war. Washington has agreed to cut duties on Chinese goods to 30% for the next 90 days. Tariffs on U.S. goods imported into China will drop to 10% from 125%.
Inflation is likely to rise this year due to tariffs, but perhaps not as sharply as predicted before the 90-day ceasefire between the world’s two largest economies. This gives the Federal Reserve some breathing room to maintain its wait-and-see approach. Economists also predict that the easing of trade tensions could help the U.S. economy sidestep a recession, though growth will likely be sluggish this year.
The Fed has a target of 2% inflation. President Trump sees tariffs as a tool to raise revenue to counterbalance his promised tax cuts and to rekindle a long-waning U.S. industrial base. But as we’ve seen, the ripple effects of these tariffs are far-reaching, impacting our wallets, our businesses, and our economy.
The delicate dance of economics continues, with the American people caught between the push and pull of inflation and tariffs. The outcome remains uncertain, but one thing is clear: the decisions we make today will shape the America of tomorrow.
