The shipping container was offloaded from a Port Miami freighter on April 15, 2025 in Miami.
Joe Raedle | Getty Images
In April, inflation again recedes in the wake of low prices for consumer staples such as groceries and gasoline and other items such as used cars and clothing.
The consumer price index, the main inflation meter, rose 2.3% in April 12 months ago, down from 2.4% in March, the Bureau of Labor Statistics reported Tuesday.
This was the smallest annual increase since February 2021, just before pandemic-era inflation began to appear.
But economists warn that when tariffs imposed by President Donald Trump begin to rekindle inflation, when it is nearly tamed from pandemic-era highs, it’s a question of whether it’s not a problem.
“I felt like I could declare victory by bringing inflation back into the bottle, but I’m back again,” said Mark Zandy, chief economist at the Moodys.
He hopes tariffs will have a significant impact on inflation in his May CPI report issued next month.
“Immerse this report,” Zandi said. “It’ll take a while before I get another good one.”
How tariffs affect inflation
Customs duties are taxes on imports from abroad paid by US companies that import goods or services. The negatively affected businesses are expected to take over at least some of their additional costs to consumers at a higher price.
Trump imposed tariffs on some tranches in his second term, which he removed or delayed.
The currently effective tariff policy will cost an additional $2,800 for the average US household over the “short term” period, according to a Yale Budget Lab report issued Monday. (No time frame specified.)
Economists say the rate at which businesses raise prices differs.
Some people don’t want to quickly raise them to avoid alienation of consumers. Others may have sufficient stock and can avoid price hikes until unfavourable stocks are low. Some people try to raise prices early in anticipation of higher costs.
Joseph Gagnon, a senior fellow at the Peterson Institute of International Economics, said the average tariff rate of 10% would add up to 1 percent point to the consumer price index in about six to nine months.
Given current policy, the average rate is a “rational” guess, he said.
Currently, most US trading partners have a baseline tariff of 10%, and in China there are at least 30% higher charges. We also have 25% of our operations on certain products such as steel, aluminum, certain automobiles, auto parts, and certain products in Canada and Mexico.
Of course, it is unclear where the policy will ultimately land.
Even after a temporary trade deal with China was announced on Monday, “core” CPI inflation will rise to 3.5% by the end of 2025, Stephen Brown, deputy chief economist for North American economics at Capital Economics, wrote in a memo on Tuesday.
Core inflation, which removes energy and food prices that could become a volatile category, was 2.8% in April.
“I think tariffs are the biggest question mark on the outlook for inflation,” said Sarah House, senior economist at Wells Fargo Economics.
“There is all this incredible trade uncertainty and with everything we import, we have higher tariffs,” she added.
CPI’s “Signs of Tariff Effects”
The CPI report may have “signs of tariff effects,” writes Brown of Capital Economics.
For example, Brown’s memo showed that between March and April, the prices of audio equipment rose by about 9%, while the prices of photography equipment rose by 2.2%.
However, “the overall tariff impact has been muted,” he wrote.
Meanwhile, gasoline prices fell 0.1% from March to April, on a seasonally adjusted basis, according to CPI data. They’re down 12% that year.
Petrol prices have fallen (or contracted) in recent months, along with oil prices where petrol is refined. Oil prices have fallen amid fears of a recession. This means lower demand for oil and increased supply.
More details from personal finance:
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Grocery prices also fell by 0.4%. Reducing fuel costs could lead to reduced costs for transporting food from farms to shelves, economists said. Brown wrote, a “sharp” monthly decline (13% decrease) in egg prices also contributed.
Used cars and truck prices fell 0.5% that month, as did apparel (-0.2%) and airline fares (-2.8%).
The biggest CPI component, housing inflation, is also tamed, but remains a 4% increase per year.
Overall, CPI inflation in “services” gradually decreased due to housing combinations. A weak labor market where workers do not frequently quit their jobs and companies do not need to raise wages quickly. And there is a delayed effect of inflation in “sedge” products, House said.
