WASHINGTON (AP) 鈥� Inflation cooled for the third straight month in April even after some of President Donald Trump鈥檚 tariffs took effect, though economists and many businesses expect inflation will climb in the coming months.
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 .
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.
The report suggests the tariffs haven't yet impacted the prices of many items. Clothing costs fell 0.2% from March to April, while new car prices were unchanged. Furniture costs jumped 1.5%, however.
Trump has also imposed 25% tariffs on nearly all imports of steel and aluminum as well as the 10% universal duty that he announced April 2 and that took effect a few days later. His huge 145% import taxes on Chinese goods were reduced to 30% in a deal announced Monday.
Still, economists say average tariffs are now at about 18%, roughly six times higher than before Trump took office.
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鈥檛 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.
THIS IS A BREAKING NEWS UPDATE. AP鈥檚 earlier story follows below.
WASHINGTON (AP) 鈥� Inflation may have picked up slightly last month as President Donald Trump's 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 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.
鈥淔irms 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,鈥� Laura Rosner-Warburton, cofounder of Macro Policy Perspectives, wrote in note to clients.
The Trump administration said early Monday that it had 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.
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 鈥淣O 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, 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 鈥� such as the reached last week 鈥� he has also said 鈥渢ariffs is the most beautiful word鈥� 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 , 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.
Christopher Rugaber, The Associated Press
