Will the April CPI Report Show the First Inflation Impacts of Tariffs?

Key Takeaways

• Economists forecast the CPI to rise 0.3% in April after going negative in March.
• Tariffs’ full impact on inflation is likely to be seen over the next three to six months.
• Uncertainty over trade policy is likely delaying interest rate cuts.

The April Consumer Price Index Report is expected to show that consumers are beginning to feel the squeeze from President Trump’s trade war, even as tariffs’ broader impact on prices is potentially still several months away.

The CPI is forecast to have risen by 0.3% in April and 2.3% on a year-over-year basis, according to the consensus estimates from FactSet. Core inflation, which excludes food and energy costs, is expected to have risen 0.3%, or 2.8% year over year. In March, the CPI fell on a monthly basis for the first time since 2020, as energy prices dragged inflation pressures downward.

“Tariffs were likely a modest source of inflationary pressure in April,” wrote Bank of America analysts in a recent report, noting: “Larger inflation prints due to tariff hikes are in the pipeline.”

April CPI Report Highlights

• CPI report release date and time: Thursday, May 13 at 8:30 a.m. EST
• The CPI is forecast to rise 0.3% in April after falling 0.1% in March.
• Core CPI is forecast to rise 0.3% in April after rising 0.1% in March.
• The CPI year over year is forecast to rise 2.3% in April after rising 2.4% in March.
• Core CPI year over year is forecast to rise 2.8% in April after rising 2.8% in March.

Tariffs Will Begin to Raise Inflation, But the Worst Is Yet to Come

A key reason for the lag in tariffs feeding through to consumer inflation is the type of goods being taxed. “The issue is, most of those are intermediate goods, and so they’re not going to show up into the household consumption basket all that fast,” says Vincent Reinhart, chief economist for BNY asset management.

However, the April CPI report could be the first set of hard economic data to show a direct impact of Trump’s trade wars. “The first set of tariffs from the current Administration went into effect in early February (a 10pp increase on US imports from China implemented on February 4), suggesting we should start to see initial tariff impacts in the April CPI,” wrote UBS analysts.

UBS continued: “The May through October CPIs are likely to see notably larger impacts from both the February tariffs as well as the significantly larger tariffs implemented since that first February tranche assuming current tariff policies remain in place. The biggest impacts of the tariffs will likely be the direct impact on core prices, and within that the impact should first appear in core non-transportation goods. In the April CPI, we expect core non-transportation goods prices to rise by the most in over two years with a rise that is among the top couple dozen increases for the category since the early 1980s.”

UBS analysts added that another reason for the lag in tariffs’ effects on inflation is that firms may be reluctant to raise prices while they draw down inventories. US businesses bolstered their stockpiles of certain goods ahead of tariff implementation, driving the US trade deficit to record levels in March.

Tariff Uncertainty Holds the Fed Back

After the Federal Reserve kept rates steady during its May meeting, chair Jerome Powell called cited uncertainty over tariffs in particular as a reason for its hesitance. “We’ll know more with each week and month that goes by where—about where tariffs are going to land ... and we’ll know what the effects will be when we start to see those things,” he said. “I can’t tell you how long it will take. But for now, it does seem like it’s a fairly clear decision for us to wait and see and watch.”

The bond futures market prices in an 86% chance that the the Fed will continue to hold rates steady at its June meeting, while putting a roughly 60% chance of a 0.25-point cut in July. The current federal-funds rate target range is 4.25%-4.50%.