Inflation Check: Tariffs and Economic Impact

For the third consecutive month, inflation eased in April, even as some of President Donald Trump's tariffs began to take effect. Economists and business owners, however, anticipate inflation to rise in the coming months.

According to the Labour Department, consumer prices increased by 2.3% in April from the previous year, a decline from March's 2.4%, marking the smallest yearly increase in over four years. Month-over-month, prices saw a modest rise of 0.2% from March to April, following a 0.1% decrease the previous month—the first in five years.

This trend suggests that the tariffs have yet to significantly affect pricing for many items. While grocery prices dipped by 0.4%, driven by a substantial fall in egg prices, other sectors like furniture saw an increase. Core prices, excluding food and energy, rose by 2.8% year-over-year in April, maintaining March's pace.

Initial tariffs imposed by Trump include 25% duties on steel and aluminum and on some imports from Canada and Mexico, as well as initial 20% tariffs on Chinese goods. While these are expected to influence consumer products over time, economists say that the average tariff is now approximately 18%, significantly higher than before Trump's presidency.

Despite some companies absorbing the costs, others, like Mattel Inc. and Stanley Black & Decker, have raised prices and may further do so to counter the tariffs' impact. Economists like those from the Yale Budget Lab predict the tariffs will elevate prices by 1.7% and cost households about USD 2,800 annually. Tariff-related challenges are putting the Federal Reserve in a precarious position, with potential simultaneous risks of higher inflation and unemployment looming.

(With inputs from agencies.)