The April inflation report delivered a mild surprise: despite expectations that President Trump’s new tariffs would begin pushing prices higher, the latest Consumer Price Index (CPI) shows that inflation actually cooled, marking a significant moment in the unfolding post-tariff economic narrative.
The headline CPI rose just 0.2% from March to April, slightly below economists’ forecast of 0.3%. On an annual basis, prices are up 2.3%, the lowest 12-month inflation reading since February 2021. This marks the third consecutive month that Wall Street economists have overestimated month-to-month inflation, raising questions about how tariff impacts are playing out in real time.
The core CPI, which excludes volatile food and energy components, also rose 0.2% for the month—again, lower than the expected 0.3%. Core prices are up 2.8% year-over-year, showing modest progress toward the Federal Reserve’s 2% inflation target, but still above ideal.
Key takeaway: The feared April inflation spike—driven by new import taxes—has not materialized. Prices are rising slowly and, in some categories, even declining.
This was the first full inflation report since Trump’s April 2 “Liberation Day” announcement, when he unveiled a sweeping set of tariffs, including across-the-board 10% duties and steep increases on Chinese imports (some of which have been in place since February).
Yet the numbers show little to no inflationary impact from tariffs—at least not yet:
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New car prices (often flagged as a tariff-sensitive category) were flat.
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Used car prices dropped 0.5%.
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Apparel prices, also reliant on imports, declined 0.2%.
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Toys and hobby goods, another import-heavy category, dropped 0.3%.
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Smartphone prices plunged 0.6% in April and are down 14.6% year-over-year.
These data points undermine the immediate inflationary narrative around tariffs and suggest that retailers and importers may be absorbing the costs—or that the impact is still lagging in the consumer pricing chain.
Despite the mild overall reading, certain domestic-driven costs are still rising:
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Services inflation rose 0.3%, indicating pressure on non-goods sectors.
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Shelter costs climbed 0.3%, with rents and owner-equivalent rent both up 0.4%. Over the past year, rent is up 4.0% and OER is up 4.3%.
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Restaurant prices increased 0.4% in April and are up 3.7% year-over-year, reflecting rising labor and operations costs in the service sector.
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Health-related insurance and services also ticked upward.
In contrast, energy prices (despite a small 0.7% gain in April) are down 3.7% from a year ago, with gasoline prices down 11.8%—a key relief point for consumers.
Perhaps the most politically visible number: egg prices plunged 12.7% in April, the biggest monthly drop since 1984. Even though they remain 49.3% higher than a year ago, the sharp drop is a clear sign that supply chains are adjusting, even as avian flu continues to pressure production.
If it’s not tariffs pushing prices higher, what is?
The evidence points squarely at domestic housing and service-sector demand. Housing inflation, especially shelter and rent, remains the dominant contributor to CPI gains. This indicates that inflationary pressures are increasingly being driven by internal demand, not external trade policy.
