For months, American consumers and businesses have been hearing that President Trump’s massive import taxes—tariffs—would drive up prices and hurt the U.S. economy. But the latest economic reports don’t match the doom and gloom: Inflation actually eased last month, and hiring was solid in April.
For now, the disconnect has businesses and consumers struggling to reconcile what they were told to expect, what the numbers say and what they are seeing on the ground. Trump and his supporters are quick to point out that the trade wars of his first term didn’t translate into higher overall inflation across the economy.
So is it time to breathe easy?
Not yet, economists say. Trump’s tariffs are still huge—the highest since the Great Depression of the 1930s. They’re unpredictable: The president frequently announces tariffs only to suspend them days later and to conjure up new ones. And they are still working their way through the system.
“We had a good jobs report. We had a cool inflation report, and that’s great,” says Ernie Tedeschi, director of economics at Yale University’s Budget Lab. “But that should not give us comfort about what next month will be, particularly on inflation.’’
Walmart, for example, warned its customers last week that prices will be going up for everything from clothing to car seats. Prices for some items like bananas have already increased.
True, the truce with China last Monday dramatically reduced the risks to the U.S. economy, and U.S. and global stock markets rallied last week in relief. The U.S. dropped the import tax that Trump angrily imposed on China—America’s third-biggest source of imports—from an eye-watering 145% to 30%; Beijing cut its retaliatory tariffs from 125% to 10%. Economists at JPMorgan Chase, who had forecast last month that the China tariffs made a recession likely, don’t expect one now.
