Inflation gentler than expected in April, Trump’s tariff drawbacks helpful in easing costs: CEI analysis

The Consumer Price Index report for April shows inflation increased 0.2 percent across all sectors, a less severe rise than many economists anticipated. CEI senior economist Ryan Young says Trump’s tariff drawbacks were a factor in preventing costs from rising faster.

“April’s CPI reading was gentler than expected. April 2 was President Trump’s Liberation Day tariff announcement. Fortunately, the full brunt of those tariff increases never came into effect. Trump withdrew the biggest tariff increases about a week later after financial markets crashed. That was one factor.

“Another is that since the tariffs were enacted on very little notice, US Customs was initially unable to enforce or collect revenue on many of the new tariffs, though the long-run tax implications are unclear.

“Companies shipped as many products as they could in a midnight rush to avoid new tariffs, which also helped stave off price increases. Many consumers stockpiled goods if they could afford to.

“May’s reading will be interesting. The UK and China deals locked in higher 10 and 30 percent tariff rates, respectively, possibly for the duration of the administration, while at the same time taking 145 percent tariffs off the table. That puts simultaneous upward and downward pressure on prices.

“While the administration’s energy policies can be expected to help lower fuel prices, oil and gas companies will suffer from higher input costs from the tariffs for necessary equipment, suggesting that hope for a sustained fall in those prices may be wishful thinking.

“Tariffs have already shrunk the economy, and supply chain problems will continue through at least the second quarter. While it’s too early to be sure, the worst inflation fears might have been avoided, thanks to Trump deciding not to go through on all of his tariff threats. The Federal Reserve’s job might have just gotten a little easier.”