The Impact of Tariffs on Your Wallet

The cost of living saw a slight dip in April. This was the third month in a row where inflation slowed down. Prices went up by 2. 3% compared to the same time last year. This is the smallest increase in over four years. Month-to-month, prices rose by 0. 2% from March to April. This is a small increase after a drop in February and March. Grocery prices fell by 0. 4%. This drop was mainly due to a big 12. 7% fall in egg prices. It was the biggest drop in food costs at home since September 2020. The tariffs imposed by the government haven't yet had a major impact on prices. Clothing costs fell by 0. 2% from March to April. New car prices stayed the same. However, furniture costs jumped by 1. 5%. If you exclude food and energy, core prices rose by 2. 8% in April compared to a year ago. This is the same as in March. Some early tariffs were in effect in April. These included a 25% duty on steel and aluminum. There was also a 25% duty on some imports from Canada and Mexico. A 20% import tax on goods from China was also in place. These tariffs will take time to affect consumer products. They may not affect retail prices for months. The government announced a universal 10% tariff that took effect in early April. The huge 145% import taxes on Chinese goods were reduced to 30%. This was part of a deal announced in early May. Average tariffs are now at about 18%. This is roughly six times higher than before the tariffs were imposed. It is the highest in about 90 years. Items that were already in transit when the tariffs were imposed won't have to pay the duties. Many companies have built a stockpile of goods. They could hold off on price hikes in hopes that tariffs will ultimately be reduced. Some companies have raised prices or plan to do so. Mattel Inc. , the maker of Barbie dolls and Hot Wheels cars, said it would have to raise prices on some products. The company makes 40% of its products in China. Tool maker Stanley Black & Decker raised prices in April. They plan to do so again in the July-September quarter. Procter & Gamble, the consumer products giant, said it will likely have to pass on higher prices to consumers as soon as July. Consumer prices cooled noticeably in February and March. This prompted the government to claim that there is “NO INFLATION. ” Inflation has fallen to nearly the 2% target set by the Federal Reserve. The Federal Reserve is the agency charged with fighting higher prices. The smaller import taxes on Chinese goods will limit the damage to the U. S. economy. But combined with all the other tariffs, economists forecast they will still slow growth this year. They will also worsen inflation. The Yale Budget Lab estimates the tariffs will lift prices by 1. 7%. They will cost the average household about $2, 800 this year. The government may tout its trade deals. But it has also said “tariffs is the most beautiful word” in the dictionary. It is counting on revenue from duties to narrow the budget deficit. This suggests tariffs will likely remain high. The tariffs have also put the Federal Reserve in a difficult spot. Chair Jerome Powell acknowledged this in a news conference. He said the duties have raised the risk of both higher inflation and higher unemployment. These are two challenges that rarely occur simultaneously. If unemployment rose, the Fed would typically cut rates to boost the economy. If inflation worsened, the central bank would usually raise rates or leave them elevated.