When President Donald Trump implemented his tariff system shortly into his second term, a flood of troubling forecasts from established economists quickly followed. A sweeping wave of heightened inflation, they prophesied, was on the horizon, a blowback from the tariffs that contradicted the expectations of the numerous Americans who had voted Trump into office specifically to contain inflation. Yet, the projected surge of inflation resulting from the tariffs has yet to occur. The reality, thus far, has proven to be markedly different.
Contrary to these bleak forecasts, consumer prices have experienced only a slight annual increase of 2.4% last month, as reported by the Bureau of Labor Statistics. This was a far less substantial rise than anticipated by most economists and was only just over the 2.3% rate recorded in April, marking the lowest inflation in the US economy since February 2021.
According to the Personal Consumption Expenditures price index heavily relied upon by the Federal Reserve, the core inflation which eliminates the constantly fluctuating items such as food and gas prices, reduced to 2.5% in April. This was the least inflation since the previous year’s March.
These figures starkly contrast with the predicaments forecasted by economists and the general public. American businesses had predicted a need to increase prices due to the substantial tariffs, which contradicted the trend of inflation consistently falling short of Wall Street’s projections. The effective tariff rate of America now stands at 14.1%, revealing a dramatic increase from last year’s 2.3%, as reported by Fitch Ratings.
Consequently, President Trump effectively raised taxes on goods imported by almost 12 percentage points in 2025. Economists foresaw significant inflation surges as a natural fallout of this development. But the question arises: Why have their predictions not come to pass? Does this implicate incompetency among economists? Not necessarily.
Their predictions may still actualize in the future, and most economists still stand by their initial estimations. Given the sheer size and complexity of America’s economy, predicting fluctuations in prices is no straightforward task. The especially challenging nature of President Trump’s intermittent tariff policy certainly doesn’t make this any easier.
Despite these factors, tariffs that endured until the middle of June did nothing to trigger an inflation surge. Whether one supports or opposes tariffs, it cannot be disputed that the current rate of inflation is less than what it was when Trump initially took office. Very few things have seen a price increase.
Interestingly, a former Wall Street economist, now serving as a Treasury Department official, took the opportunity to celebrate the fact that inflation has not escalated since Trump instigated tariffs in his second term. According to Lavorgna, a counselor to the Treasury Secretary, tariffs have not influenced the data in any evident manner. He brazenly proclaimed that the forecasting community got it wholly incorrect.
However, economists beg to differ. A number of prominent experts insist that the tranquil inflation of the spring signifies the lull before an imminent storm of price rises in the summer. Stephanie Roth, Wolfe Research’s chief economist, voiced her belief to CNN that it’s simply a matter of time before prices start going up.
“Nobody wants to be the first to make a move,” Malladi stated, emphasizing that brands are wary of possible reputational damage from raising prices at this stage, fearing their consumers may retract their patronage. He noted that some businesses may be prepared to let their margin suffer for some time.
He continued to convey the extent of businesses’ worries about the situation. Malladi highlighted that holding tight on low inventories complicates companies’ efforts to stabilize prices. Therefore, Akullian foresees the impact of tariffs on inflation becoming more evident eventually.
Despite successfully keeping prices low initially, even Lavorgna from the Treasury admits that because of the tariffs, inflation might start to go up in the future. However, he made it clear that any potential impact of the tariffs on impending numbers isn’t guaranteed.
The post Inflation Lagging Despite Trump’s Tariffs: Economists Baffled appeared first on Real News Now.
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