Inflation Eases Amid New Tariffs: What Economists Warn About Future Trends

Inflation has been easing for three months as of April, with consumer prices rising by 2.3% compared to last year. This number is down from 2.4% in March, marking the smallest increase in over four years. On a monthly basis, prices rose by only 0.2% from March to April, recovering slightly after a drop the month before.

One bright spot for shoppers is that grocery prices dipped by 0.4%, the largest decline since September 2020. Specifically, egg prices plummeted 12.7%, the biggest drop in 41 years, although they’re still nearly 49% higher than last year. Experts suggest that the tariffs implemented by former President Trump haven’t significantly impacted prices yet. The real effects of the 10% tariffs that took effect on April 5 may not be felt until June or July, with many companies having stockpiled goods in anticipation.

Laura Rosner-Warburton, an economist and co-founder of MacroPolicy Perspectives, emphasizes, “It’s still early to assess the full effects of these tariffs. More price increases are expected in the coming months.” So far, while some prices, like clothing and new cars, have remained steady or dropped, other items, especially electronics and imported goods, have started to rise, hinting at future inflation pressures.

Core inflation, which excludes food and energy prices, was stable at 2.8% on a yearly basis in April, much like March. This stability is notable since core prices usually give clearer insight into future inflation trends. For example, airfare and hotel prices dropped significantly last month, contributing positively to overall inflation figures.

However, companies like Mattel and Procter & Gamble have already signaled intentions to raise prices due to increased tariffs. Mattel, which produces 40% of its products in China, stated it would need to hike prices. Similarly, Stanley Black & Decker announced price increases as well.

The average tariffs now stand around 18%, significantly higher than rates prior to Trump’s presidency and the highest in nearly a century. According to the Yale Budget Lab, the current tariffs could lift consumer prices by approximately 1.7%, costing the average household an additional $2,800 this year.

In light of the ongoing changes, businesses are in a precarious position. Rick Woldenberg, CEO of Learning Resources, detailed how the elevated tariff levels dramatically escalated his costs. He has paused shipments as he navigates this uncertain landscape, emphasizing, “We just don’t know what our costs are.” This sentiment resonates widely among small businesses grappling with the murky future of tariffs and shipping costs.

As consumers and businesses adjust to these developments, the landscape of inflation and pricing remains dynamic. Keeping an eye on trends and data will be crucial for understanding where we are headed economically in the next few months.

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China, Mexico, Inflation, Donald Trump, International trade, Economic policy, Public health, Federal Reserve System, Government policy, General news, Tariffs and global trade, Stanley Black Decker, Inc., Consumer products and services, Mattel, Inc., Rick Woldenberg, U.S. news, Business, Laura Rosner-Warburton, Cars, Procter Gamble Co., U.S. News