Tuesday’s report may offer an early glimpse into how former President Donald Trump’s sweeping tariffs are beginning to influence the prices Americans pay for everyday items.
Inflation appears to have edged up in April as Trump’s tariffs took effect. Economists expect this trend to become more apparent in the months ahead.
Consumer prices likely climbed 2.4% last month compared to April a year ago, according to FactSet. That pace matches March’s figure and is down from 3% at the beginning of the year. However, on a monthly basis, economists estimate that prices rose 0.3% from March to April—an increase that could fuel inflation if sustained. This follows a rare monthly decline in prices, the first in nearly five years.
The report is expected to shed light on how tariffs are affecting costs for essentials and a wide range of goods including apparel, shoes, furniture, and groceries. Tariffs on many products from Mexico and Canada took effect in February and may have driven prices up in April. Still, most economists expect only a modest impact from these duties.
“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 of Macro Policy Perspectives, in a client note.
The Trump administration announced Monday that it had reached a deal with China to substantially reduce tariffs on Chinese imports. Still, economists pointed out that average U.S. import taxes remain at levels not seen in 90 years—an ongoing risk for inflation.
Tariffs on furniture, agricultural products from Mexico, and on clothing and footwear may have contributed to April’s price increases. Car prices also likely rose, driven by a spike in auto sales as buyers tried to beat the tariff hikes—reducing the need for dealers to offer discounts.
Excluding food and energy, which are often volatile, core consumer prices are projected to have increased 2.8% over the year, consistent with March’s figure. On a monthly basis, core prices are expected to rise 0.3%, up from just 0.1% in the previous month.
Economists say it will take more time before the full effect of the tariffs is reflected in prices across U.S. businesses. Goods that were already in transit when the tariffs began won’t incur the new duties. Many companies also stocked up in advance and may delay price hikes, hoping tariffs will be rolled back.
Consumers—especially those outside the top 20% of income earners—are financially more strained than they were a few years ago, making them more resistant to higher prices. This pressure could prompt companies to hold off on price increases for now.
Prices cooled significantly in February and March, leading Trump to repeatedly assert on social media that there is “NO INFLATION.” Inflation has nearly dropped to the Federal Reserve’s 2% target.
However, grocery prices have surged in two of the last three months, contradicting Trump’s claims. He also said gas prices had fallen to $1.98 a gallon—below actual averages in every state. AAA reported Monday that the national average for gas stands at $3.14 per gallon.
On Monday, the White House announced it had cut tariffs on Chinese goods from 145% to 30%. China reciprocated with significant tariff reductions on U.S. goods. If a broader agreement isn’t reached within 90 days, both countries could reimpose 24% tariffs.
These reduced import taxes will ease some pressure on the U.S. economy. However, the existing 10% universal tariff—along with higher duties on autos, steel, and aluminum—will likely slow economic growth and intensify inflation, economists say.
The Yale Budget Lab estimates the average U.S. tariff will remain close to 18% even after the latest U.S.-China deal. That would mark the highest average tariff rate since 1934. According to the lab, tariffs will boost prices by 1.7% and cost the average U.S. household roughly $2,800.
While Trump highlights recent trade agreements—like last week’s deal with the United Kingdom—he has also described “tariffs” as “the most beautiful word” in the dictionary. He’s relying on tariff revenues to help reduce the budget deficit, suggesting high tariffs are here to stay.
The Federal Reserve now faces a tough dilemma, as Chair Jerome Powell noted during a news conference last week. The tariffs are increasing the likelihood of both rising inflation and growing unemployment—two issues that usually don’t occur together. If unemployment climbs, the Fed would typically cut rates to stimulate the economy. But if inflation worsens, the central bank might need to raise rates or keep them elevated.
