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Actually slow Trump's tariffs (for now?)

Actually slow Trump's tariffs (for now?)

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Another potentially encouraging inflation report this week could at least partially be due to a surprising source: President Donald Trump's extensive tariffs.

The import fees are expected to increase prices in the next one or two months, as companies will pass on most of their additional costs to consumers.

But for the time being, the taxes help to promote inflation by the financial and expenditure of the Americans, at least for some services, the finances and expenses of the Americans Crimbs, said Ryan Sweet, head of the US economist from Oxford Economics.

Of course, only a few prognostics believe that a temporary decline in inflation is worth an upcoming economic downturn.

However, the withdrawal could make it more difficult to explain the chairman of the Federal Reserve, Jerome Powell, why the officials still hold back market -friendly interest rates, especially if employment growth begins to weaken this month.

“If you receive a disappointing job report and the number of inflation looks good, the market will say:” Why don't you cut? “Sweet said.

Trump launched Powell again on Thursday and described the Fed chair as a fool who “has no idea” in a social media contribution. The FED decided on Wednesday to keep interest rates stable, and Powell repeated Trump's demands for lower interest rates no effect on the Fed decisions.

Does inflation really go under?

Some of the inflation -preserving effects of Trump's tariff announcements are already visible. In March, the total inflation dropped to a five-month low of 2.4% and a nuclear measure, which, according to the consumer price index, has decreased volatile food and energy plants to 2.8% that have been low since March 2021. Inflation was practically flat monthly.

The trade war was not necessarily the main reason for the benign readings. The used car prices fell and the rent rose an average of 4% annually, the smallest increase since January 2022.

But the inflation discharge of tariffs could continue to exist in the April CPI report, which is to be published on Tuesday, and also the figures in May, said Sweet.

What are the expectations of CPI in April?

According to the economist, which was questioned by Bloomberg, the inflation kept a total of 2.4% stable last month, although Barclay's estimates have dropped to 2.3% that have been the lowest since February 2021 and modestly above the 2% goal of the FED. The nuclear measure is said to have remained at 2.8%.

Other forces in addition to tariffs can also have contributed to easy inflation last month. A loose bird flu crisis has already dramatically reduced the wholesale price and would have been pushed into retail prices in the last month, said Oxford.

Here is the reason why tariffs contribute the inflation of inflation:

Oil and gasoline prices

The levies have slowed down the trade considerably and the global recession concerns were enthusiastic, which reduced the US raw oil prices of 80 US dollars in January and 71 US dollars to around 60 US dollars per barrel, shortly before Trump announced on April 2.

This is not the only reason for the price decline. The Opec agreed to increase oil production from April, Sweet and Barclay's Economist Pooja Sriram noticed.

In March, gasoline prices were again 6.3%, and Barclays estimated that they dropped another 0.4% last month.

Flight prices and hotel prices

The trade war has discouraged foreign trips to the USA, especially from Canada, the economist Stephen Brown wrote from Capital Economics to customers in a reference. The US budget expenditure generally kept themselves despite the strong trust of consumers, but the Americans begin to spends for big-ticket objects such as vacation to repeting, said Sweet.

The airlines to reduce tariffs too: The falling oil prices have reduced the cost of fuel jet, he said.

Flight prices fell by 4% in February and 5.3% in March. Barclays estimates that they slipped by another 2% in April.

Such costs usually increase in spring before the summer travel season, said Sriram. The drop, she said, was probably “bound with the feeling”.

Financial service fees

When the stock market relied on an all -time high in February, the fees raised by investment companies contributed to the promotion of inflation, since they are based on a percentage of the overall stock of customers that were swollen.

Despite a recent rally, a tariff share sale has released the S&P 500 index about 8% discount to the climax in February. And the market remains volatile.

Such financial services fees do not have a significant weight in the CPI report, but in another inflation reading -as a PCCE price index (personal consumption expenditure), which the Fed follows more precisely.

In total, sweet estimates could limit such effects by around three tenths of percentage points in the next month.

However, he assumes that tariffs will increase the prices for used cars and other articles in June, while Sriram starts acceleration in July. Both economists expect core inflation to increase to around 4% by the end of the year.

“The number of inflation will look good in April and possibly in May,” said Sweet. “But the thrust of inflation comes from tariffs.”

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