A shipping container was unloaded from a freighter at Port Miami on April 15, 2025.
Inflation saw a slight decrease in April, driven by lower costs for essentials like groceries and gasoline, alongside items such as used cars and clothing.
The Consumer Price Index rose by 2.3% in April compared to the previous year, down from 2.4% in March, as reported by the Bureau of Labor Statistics.
This marks the smallest increase since February 2021, right before inflation began to heat up during the pandemic.
However, economists express concern that inflation might resurge due to tariffs put in place by former President Trump, which could complicate the current situation. “I thought I had managed to control inflation, but here we are again,” remarked Mark Zandy, chief economist at Moody’s.
He anticipates that the reach of tariffs will emerge significantly in the upcoming May CPI report.
“This report is essential,” Zandy mentioned, adding that good news might not come easily again.
Impact of Tariffs on Inflation
Customs duties, or tariffs, are taxes on imported goods that U.S. companies pay. Affected businesses are likely to pass on some of these additional costs to consumers.
Trump enacted various tariffs during his second term, some of which he then repealed or postponed.
According to research from Yale’s Budget Lab, the ongoing tariff policies could see an average U.S. household incur an extra $2,800, as highlighted in a recent report published on Monday.
Economists note that how quickly businesses increase prices greatly varies.
Some are cautious, not wanting to alienate customers, while others might have enough inventory to hold off on price hikes for a bit longer. A few might even raise prices preemptively in anticipation of higher costs.
Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics, indicated that an average tariff rate of 10% could potentially add one percentage point to the consumer price index within six to nine months.
He views the current average rate as a “reasonable” estimate.
Most U.S. trading partners are subject to a baseline tariff of 10%, with some products imported from China facing even higher rates of at least 30%. Certain products, like steel and aluminum, even have tariffs of 25%.
Yet, the future of these policies remains uncertain.
Even after announcing a temporary trade agreement with China on Monday, “core” CPI inflation is projected to reach 3.5% by the end of 2025, according to Stephen Brown, a deputy chief economist at Capital Economics.
Core inflation, which excludes volatile food and energy prices, stood at 2.8% in April.
“Tariffs remain a significant uncertainty for future inflation,” noted Sarah House, a senior economist at Wells Fargo. “With all this trade uncertainty and our continued higher tariffs, it complicates the landscape.”
Signs of Tariff Effects in CPI
Brown from Capital Economics mentioned that the CPI report could show “signs of tariff effects.”
For instance, between March and April, audio equipment prices jumped around 9%, while photography equipment rose by 2.2%.
However, he pointed out that “the overall effect of tariffs has been somewhat muted.”
On another note, gasoline prices dropped by 0.1% from March to April, reflecting a broader annual decrease of 12%.
This decline in petrol prices occurred alongside reduced oil prices and is attributed to fears of a recession, leading to lower demand for oil and a greater supply.
Grocery prices also registered a decline, down 0.4%. Lower fuel costs might help ease expenses related to transporting food.
Additionally, a notable drop of 13% in egg prices played a part in this trend.
Prices for used cars and trucks fell by 0.5%, along with apparel and airline fares seeing decreases of 0.2% and 2.8%, respectively.
While housing inflation remains a significant CPI component, it too has been moderated to a 4% yearly increase.
Overall, CPI inflation related to services has gradually decreased due to factors like a weaker labor market, where employees are less likely to change jobs, resulting in less urgency for companies to raise wages. There’s also a delayed impact on inflation related to certain products, according to House.
