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Economic News

United States: Inflation Not Yet Affected by Tariffs

May 13, 2025
Francis Généreux
Principal Economist

Highlights

  • The Consumer Price Index (CPI) rose 0.2% in April, following a 0.1% decline in March. Excluding food and energy, the core CPI increased by 0.2% in April, following a gain of only 0.1% in March.
  • The annual change in the total CPI decreased from 2.4% to 2.3%. Core inflation remained steady at 2.8%.

Comments

Total inflation slowed again in the United States. The 2.3% rate is the lowest since February 2021. However, a slight acceleration in monthly price variation was noted in April, following the previous month’s decline. The return to monthly growth occurred despite a decline in grocery prices (including a notable 12.7% plunge in egg prices). On the energy side, a decrease in gasoline prices was more than offset by increases in electricity and heating oil prices.

 

It is difficult to see in today’s data a clear-cut impact of the US tariffs imposed on most countries around the world in early April and the trade war between China and the United States. As expected, it will take several months to get a clearer picture of the net effects on consumer prices. At best, the consequences of a decline in demand for US goods and foreign tourism can be seen in the softening of food prices, the further decline in airfares, and the slight decrease in hotel prices.

 

Despite the tariffs, prices for goods excluding food and energy rose only 0.1%, following a decline in March. This was enough to push the annual change in core goods prices back in positive territory for the first time since December 2023. It is likely that there will be more upward pressure on these prices in the coming months. As for services, there is slightly more pressure coming form shelter. Core services excluding housing and energy also showed growth in April, following a decline in March.

Implications

Price pressures were somewhat more acute in April than in previous months. We are now more in a wait-and-see mode to determine whether the Trump administration’s trade policy will soon have more noticeable effects on the CPI. Despite easing trade tensions between the US and China, tariffs are still much higher than at the beginning of the year, and this is likely to eventually impact the cost of living and real income of Americans. This presents a challenging situation for the Federal Reserve, which remains on the sidelines for now, despite pressure External link. from President Trump.

NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.