The pace of inflation slowed in April when Donald Trump announced his drastic “liberation day” tariffs on the largest US trading partner.
According to a new inflation report from the Bureau of Labor Statistics (BLS), annual inflation rate was 2.3% in April, down from the annual rate of 2.4% in March.
Core inflation, which excludes volatile energy and food prices, reached an annual rate of 2.8% in April, compared to an annual increase of 2.8% in March.
The inflation report covers April, as businesses are still trying to grasp the impact of tariffs after Trump’s announcement.
Trump rolled back most of the tariffs he announced in early April, and announced a trade deal between the UK and China last week. However, imports from China face 30% collection, while most other US imports still face 10% collection. Consumers seem to support themselves at higher prices.
Consumer sentiment fell sharply in April, measured by the University of Michigan consumer survey, and inflation expectations rose to 6.5%, the highest since 1981.
A new Harris/Guardian poll released Monday revealed six out of ten Americans that they must refrain from key financial targets due to current economic and widespread indicators of economic unrest.
It is unclear how long this pessimism will last. Wall Street rose sharply on Monday after announcing a 90-day suspension in Trump’s tariff dispute with China. However, the stock market has become more responsive to changes in Trump’s tariff policy than consumers.
Economists also hope that price increases will worsen this year. Many companies still didn’t need to raise prices as many of the items currently on sale were imported before the new tariffs were in place.
“There’s not much evidence of the tariffs that boosted CPI in April, but this is not surprising as it takes time,” Oxford Economics chief economist Ryan Sweet said in a statement.
Sweet noted that despite tariff rates being reduced, the rate against China is still high. “The overall effective tariff rate in the US (in China) remains the highest since the 1930s, and that would be inflation,” he said.
The pace of inflation has slowed, but Federal Reserve officials said they hope that tariffs will affect prices, even if only temporary.
“It certainly has increased risks to higher inflation (and higher unemployment,” Federal Reserve Chairman Jerome Powell said at a press conference last week, adding that tariffs could slow the Fed’s target rate by at least a year. “At least in the next year, if that’s how tariffs are shaking, we won’t progress towards those goals.”
This is the opposite of what Trump has said about tariffs and the impact they had on prices. Trump has been in the White House for over three months, claiming that inflation is on hold from the Biden administration.
“Drug prices will be reduced by 59%. Trump wrote on social media on Monday. “Gasoline, energy, groceries, all other costs, down. No inflation!!!”