US prices continued to rise in May amid Trump tariffs

The Guardian

a day ago

US prices continued to rise in May as companies and consumers grappled with Donald Trump's tariffs. The president has repeatedly pledged to lower costs across the economy.
Annualized inflation ticked higher to 2.4% in May, up from 2.3% in April, and . On a month-to-month basis, the consumer price index rose by 0.1%, down from 0.2% the previous month.
The readings were softer than expected. Economists had expected a headline CPI reading for 2.5% in May, amid widespread uncertainty over the direction of the US economy.
Core inflation, which measures price increases outside of food and gas, went up 0.1% on the month, down from 0.2% in April, according to the Bureau of Labor Statistics.
In recent weeks, there have been signs of a slight cooldown in the economy, which had initially shown resiliency in the face of Trump's tariffs.
In May, the economy saw 139,000 new jobs, down from an average monthly gain of 149,000 over the prior 12 months. March and April's job gains were also revised down. The unemployment rate has remained stable, however, hovering between 4% and 4.2% over the last few months.
Since announcing the bulk of his tariffs on 'liberation day' in early April, the Trump administration has tried to frame tariffs as good for the US economy in the long run. Trump has denied that his tariffs are leading to inflation, saying last week that prices have been going down.
But economists say that gradual price increases will likely stay. Multiple retailers have said that they will increase prices due to tariffs, even as a supposed last resort. In a survey published last month by insurance company Allianz, 54% of US companies surveyed said they will have to raise prices.
Meanwhile, there have been no indications that Trump's tariffs have driven an increase in domestic manufacturing. In a survey published earlier this month, US manufacturing sentiment actually declined for the third consecutive month, reaching a six-month low.
Several of Trump's tariffs are still in place, even after he paused the bulk of his reciprocal tariffs, which are set to go back into effect in July. There's still a 10% baseline tariff on all imported goods, 30% tariff on Chinese imports (although Trump hailed a tentative deal between Washington and Beijing early on Wednesday) and 25% tariffs on auto imports, among others.
Because the supply chain is so delicately intertwined between different countries and industries, tariffs can still cause price increases on seemingly unrelated goods. For example, after Trump doubled the tax on imported steel to 50%, canned foods are likely to see price increases as the cost of cans has gone up.
Investors are closely watching the Federal Reserve's board meeting next week to see how monetary policymakers view the state of the economy. The Fed is expected to hold interest rates, which currently sit at between 4.25% and 4.5%, after officials have noted the instability caused by Trump's tariffs.