Despite a 90-day pause and temporary reduction to 10% on many US “reciprocal” tariffs, ongoing 145% tariffs on China remain potential inflationary pressures. (۶Ƶ)
The US consumer price index declined 0.1% month over month in March thanks to lower gasoline and used-car prices. The release marked the first monthly decline in prices in nearly five years, and led the year-over-year rate to moderate to 2.4% (from 2.8% in February). Core inflation that omits the volatile food and energy components came in at 0.1% month over month in March, the smallest monthly gain since June 2024, while the year-over-year rate slowed to 2.8% in March, the softest pace since March 2021 and below February’s 3.1%.
Our view: While the deceleration in US price pressures is heartening at first glance, fast-evolving conditions warrant some caution on interpreting its meaning for investors. Some investors argued the release commanded less attention given it likely captured only a fraction of the first wave of President Trump's tariffs, namely the initial 20% tariff on Chinese goods and levies on steel and aluminum. Despite a 90-day pause and temporary reduction to 10% on many US “reciprocal” tariffs, ongoing 145% tariffs on China remain potential inflationary pressures. Fed Chair Powell has suggested the Fed may take a cautious approach to interest rate cuts, remarking that “while tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent.”
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