This week’s inflation report is gonna give us a sneak peek at how President Donald Trump’s “Liberation Day” tariff announcement has really stirred things up in terms of pricing all across the good ol’ United States. Trump dropped the bomb about tariff escalation on April 2, and man, did it send shockwaves through the economy. People were freaking out about potential inflation spikes because, you know, importers tend to jack up prices when hit with extra taxes. But guess what? Government data coming out on Tuesday is expected to show that prices have stayed pretty steady so far, defying all those worries. Economists are thinking prices only went up by 2.3% in the year leading up to April, which is actually a bit of a cool-down from the previous month.
But hold on to your hats, folks, because the party might not be over just yet. Analysts are predicting a revival of inflation in the next few months as retailers start restocking their shelves with goods that got hit with those tariffs. However, there’s a little glimmer of hope on the horizon – Trump decided to dial back some of those taxes post-“Liberation Day.” He put the brakes on a bunch of those “reciprocal tariffs” real quick after the announcement. And just this Monday, he slashed tariffs on China from 145% down to 30%. Those reduced rates are gonna stick around for 90 days while the U.S. and China try to hash out a trade deal. China even agreed to drop their tariffs on U.S. goods from 125% to 10%. The rollback on Chinese tariffs is expected to save the average household a couple grand this year, according to the Yale Budget Lab.
Even with these tariff changes, the U.S. is still holding onto a bunch of taxes that have been put in place since Trump came into office. There’s a flat 10% tariff on imports from almost every country, plus extra taxes on auto parts, steel, aluminum, and some goods from Mexico and Canada. Federal Reserve Chair Jerome Powell had some thoughts on the whole tariff situation last week, warning that Trump’s tax policies could lead to higher inflation and a slowdown in economic growth. Powell mentioned that if these tariffs stick around, we could see inflation go up and the economy take a hit. He also noted that the effects of these policies are still up in the air and could shake things up more than we expect. The Fed decided to keep interest rates where they are for now, waiting to see how all these tariffs play out. They’re set to make their next interest rate call on June 18, with most investors thinking rates will stay put, according to the CME FedWatch Tool.
