CPI report: Trump's tariffs earn some points for slowing - yes, slowing - inflation. How?

Paul Davidson, USA TODAY

Mon, May 12, 2025, 2:05 AM 4 min read

Another perchance encouraging ostentation study this week could beryllium astatine slightest partially traced to a astonishing source: President Donald Trump’s sweeping tariffs.

The import fees are expected to commencement driving prices sharply higher successful the adjacent period oregon 2 arsenic businesses walk astir of their added costs to consumers.

But for now, the levies are helping tamp down inflation by raising planetary recession fears and crimping Americans’ finances and spending, astatine slightest for immoderate services, said Ryan Sweet, main U.S. economist of Oxford Economics.

Few forecasters, of course, judge a impermanent ostentation drop-off is worthy a coming economical downturn.

But the pullback could marque it much challenging for Federal Reserve Chair Jerome Powell to explicate wherefore officials are inactive holding disconnected connected market-friendly involvement complaint cuts, particularly if job growth starts to weaken arsenic soon arsenic this month.

“If you get a disappointing jobs study and the ostentation numbers look good, the marketplace volition say, ‘Why aren’t you cutting?’” Sweet said.

Trump connected Thursday again lashed retired astatine Powell, calling the Fed seat a fool who "doesn't person a clue" successful a societal media post. The Fed connected Wednesday opted to clasp involvement rates dependable and Powell reiterated Trump's calls for little rates don't interaction Fed decisions.

Some of the inflation-softening effects of Trump’s tariff announcements are already visible. In March, wide ostentation dipped to a five-month debased of 2.4% and a halfway measurement that strips retired volatile nutrient and vigor items fell to 2.8%, lowest since March 2021, according to the user terms index. On a monthly basis, ostentation was virtually flat.

The commercialized warfare wasn’t needfully the main crushed for the benign readings. Used car prices tumbled and rent accrued an mean 4% annually, the smallest emergence since January 2022. And forecasters expected ostentation to dilatory aboriginal this twelvemonth due to the fact that prices surged successful aboriginal 2024, creating much favorable comparisons to the year-ago figures.

But the inflation-dampening effects of tariffs could persist and adjacent widen successful the April CPI report, acceptable to beryllium released Tuesday, and the May numbers too, Sweet said.

Inflation wide apt held dependable astatine 2.4% past month, according to economists surveyed by Bloomberg, though Barclays estimates it edged down to 2.3%, lowest since February 2021 and modestly supra the Fed’s 2% goal. The halfway measurement is projected to person stayed astatine 2.8%.

Other forces too tariffs besides whitethorn person contributed to mild ostentation past month. An easing vertebrate flu situation already has dramatically lowered wholesale ovum prices and could person filtered into retail prices, which person been soaring, past month, Oxford said.