US inflation softens to 2.3% in April despite tariffs; Economists caution on future price pressures
US inflation eased for a third consecutive month in April, as falling grocery and gasoline prices offset early impacts from recently imposed tariffs. However, economists caution that price pressures may re-emerge in the coming months as the full effects of trade duties begin to filter through the economy.
Consumer prices rose 2.3% in April from a year ago, the Labor Department said Tuesday, down from 2.4% in March and the smallest increase in more than four years. On a monthly basis, prices rose modestly, increasing 0.2% from March to April after falling 0.1% the previous month, the first drop in five years.
Grocery prices fell 0.4%, pulled down in part by a big 12.7% drop in the price of eggs. It was the biggest decline in food costs at home since September 2020, the government said.
Food prices at home declined 0.4%, with egg prices falling a sharp 12.7%, contributing to the largest single-month drop in grocery prices since September 2020. Energy prices also eased, helping moderate overall inflation.
The data indicates that tariffs imposed by President Donald Trump have yet to significantly influence consumer prices. Despite broad-based duties — including 25% tariffs on steel and aluminum, a 10% universal tariff enacted on April 2, and previously announced 145% import taxes on Chinese goods (now reduced to 30%) — many product categories saw minimal price changes.
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Apparel prices declined 0.2%, new car prices remained unchanged, and furniture costs rose 1.5% over the month.
'Firms have indicated... that they are unsure how much of the tariff cost increase they can pass through to consumers without denting demand, and we expect some testing of the waters and a staggered pattern of price increases,' said Laura Rosner-Warburton, cofounder, Macro Policy Perspectives.
Economists suggest that the full impact of tariffs may not be reflected immediately, as many businesses had already stockpiled inventory and some imports were in transit before the duties took effect.
Meanwhile, core CPI, which excludes food and energy, increased 2.8% annually, unchanged from March. On a monthly basis, core prices rose 0.3%, up from 0.1% the previous month — a potential signal of building underlying inflation.
The White House announced Monday that it had reached a trade agreement with China, reducing tariffs on Chinese goods from 145% to 30%, while China also lowered duties on US imports. The agreement includes a 90-day review window, after which 24% tariffs could return if further progress is not made.
Despite the deal, the average US tariff remains historically high. The Yale Budget Lab estimates the current average is 18%, the highest since 1934. According to their analysis, tariffs at this level could lift prices by 1.7% and cost the average US household approximately $2,800 per year.
Gasoline prices, meanwhile, averaged $3.14 per gallon, according to AAA, contradicting Trump's repeated claims that prices had fallen to $1.98 per gallon nationwide.
'Tariffs is the most beautiful word,' Trump has said in support of the policy, suggesting duties will continue to play a central role in his economic strategy.
While inflation is currently nearing the Federal Reserve's 2% target, the combination of persistent tariffs, volatile global trade dynamics, and constrained consumer spending could complicate future monetary policy decisions.
'The duties have raised the risk of both higher inflation and higher unemployment,' said Fed Chair Jerome Powell last week.
'Two challenges that rarely occur simultaneously.'
In such a scenario, the Fed would be forced to balance its dual mandate. Lower interest rates might stimulate growth amid rising joblessness, while elevated inflation typically calls for tighter monetary policy — a contradiction that could restrict the Fed's room to maneuver.
Economists expect more pronounced tariff impacts in the second half of the year, depending on supply chain adjustments, consumer tolerance for higher prices, and further developments in international trade agreements.
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