Tariffs may have pushed up inflation a bit in April, government report
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[May 13, 2025] By
CHRISTOPHER RUGABER
WASHINGTON (AP) — Inflation may have picked up slightly last month as
President Donald Trump's widespread tariffs kicked in, a trend
economists expect will become more visible in the coming months.
Consumer prices are forecast to have risen 2.4% in April compared with a
year earlier, according to data provider FactSet, the same as in March
and down from 3% at the start of the year. Still, on a monthly basis,
economists expect that the consumer price index rose 0.3% from March to
April, a pace that would worsen inflation if it continued, after it fell
for the first time in nearly five years the previous month.
Tuesday's report could provide an early read on how Trump's duties will
affect the prices Americans pay for necessities and other goods such as
clothing, shoes, furniture and even groceries. Duties on many goods from
Mexico and Canada took effect in February and could have impacted prices
last month. Still, economists forecast the impact from duties to be
modest.
“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,” Laura Rosner-Warburton, cofounder of Macro Policy
Perspectives, wrote in note to clients.
The Trump administration said early Monday that it had reached a deal
with China to sharply reduce its tariffs on imports from that country.
But even taking that agreement into account, U.S. average import taxes
remain at 90-year highs, economists said, which could worsen inflation
in the coming months.
Tariffs on furniture, agricultural goods from Mexico, and on clothes and
shoes may have boosted prices last month. Auto prices may have risen
because car sales surged as Americans sought to get ahead of duties on
new cars and car parts, reducing the need for dealers to offer
discounts.
Excluding the volatile food and energy categories, core prices are
forecast to have risen 2.8% last month compared to a year earlier, the
same as in March. On a monthly basis, they are expected to rise 0.3%, up
from just 0.1% the previous month.
It will likely take more time for the full impact of the duties to be
reflected in prices across U.S. businesses, economists say. Items that
were already in transit when the tariffs were imposed won't have to pay
the duties, while many companies have built a stockpile of goods and
could hold off on price hikes in hopes that tariffs will ultimately be
reduced.
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 Consumers, at least those outside
the top one-fifth in incomes, are also more stretched financially
than a few years ago and are more likely to resist price hikes,
which could push firms to delay raising prices as long as possible.
Consumer prices cooled noticeably in February and March, prompting
Trump to claim repeatedly on social media that there is “NO
INFLATION." Inflation has fallen to nearly the 2% target set by the
Federal Reserve, the agency charged with fighting higher prices.
Yet grocery prices have jumped in two out of the past three months,
despite Trump's claims. He has also said gas has fallen to $1.98 a
gallon, which is below the measured average in any state. AAA said
Monday that gas costs an average $3.14 a gallon nationwide.
On Monday, the White House said it has cut the tariff it imposed on
Chinese goods from 145% to 30%, while China also sharply reduced its
duties on U.S. goods. Both sides could add 24% tariffs after 90 days
if they don't reach a broader agreement.
The smaller import taxes will limit the damage to the U.S. economy,
but combined with a 10% universal tariff already in place, plus
larger import taxes on autos, steel, and aluminum, economists
forecast they will still slow growth this year and worsen inflation.
The Yale Budget Lab, for example, estimates that the average U.S.
tariff will be nearly 18% even including the deal reached Monday
between the U.S. and China. At that level, U.S. duties will be the
highest since 1934. The Budget Lab calculates the tariffs will lift
prices 1.7% and cost the average household about $2,800.
And while Trump may tout his trade deals — such as the one with the
United Kingdom reached last week — he has also said “tariffs is the
most beautiful word” in the dictionary, and is counting on revenue
from duties to narrow the budget deficit, suggesting tariffs will
likely remain high.
The tariffs have also put the Federal Reserve in an exceedingly
difficult spot, as Chair Jerome Powell acknowledged in a news
conference last week. Powell said the duties have raised the risk of
both higher inflation and higher unemployment, two challenges that
rarely occur simultaneously. If unemployment rose, the Fed would
typically cut rates to boost the economy, while if inflation
worsened, the central bank would usually raise rates or leave them
elevated.
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