While the White House has rolled back some of its more aggressive trade policies, the broader economic outlook is uncertain, and there are still concerns that U.S. tariffs could stoke inflation. How are higher prices impacting consumer spending, and what are some key trends to watch?

Consumer prices have been softer than expected 

April’s headline and core (excluding food and energy) Consumer Price Index (CPI) prints came in at 0.2% month-over-month, slightly below expectations. However, overall prices are still 2.3% higher than they were a year ago, largely driven by shelter, food and car insurance costs.

Looking at individual categories, food prices fell -0.2% in April, led by a -12.7% drop in the price of eggs. Energy prices climbed 0.7%, fueled by a jump in natural gas prices, even as gasoline prices edged down -0.1%.

Outside of food and energy, core goods prices were notably soft. “New vehicles prices were flat in April, coming in a touch below our forecast, while used vehicle prices fell -0.7% last month. Some manufacturers have suggested they might hold the line on pricing, but industry pricing is pointing to an increase coming within the next few months,” said Michael Hanson, a senior economist at J.P. Morgan. 

Tariffs have not stoked inflation — yet

At first glance, the April CPI readings appear to suggest little impact from tariffs. However, the details within each report point to brewing upward pressure from ongoing trade uncertainty.

“With a few exceptions, the main categories in the April report tended to run somewhat soft, although as one drills down to individual goods, there are some signs of tariff-related increases in their prices,” Hanson said. 

While the April core goods CPI rose just 0.06%, several import-intensive goods such as photographic equipment and major appliances saw larger gains. “However, many of these prices are quite volatile, and similar price increases can be observed when tariffs are not in place,” Hanson noted. In addition, the April Producer Price Index (PPI) saw margins for final demand trade services (which are sold directly to the end user) plunging by -1.6%.

“Together, the data points to some firms passing through tariff price increases, while others delay and instead suffer margin compression — supporting recent revisions to our inflation forecast, even as it also portends less spending by firms on capex or employees,” said Michael Feroli, chief U.S. economist at J.P. Morgan. Already, firms including Walmart have announced they intend to hike prices due to tariffs, even as the Trump administration insists that retailers absorb the shock.

Current and future prices components in recent regional surveys, including the Empire State Manufacturing Survey, suggest upside price pressures in the coming months. Moreover, both one-year-ahead and five-year-ahead inflation expectations climbed to 7.3% and 4.6% respectively in the preliminary May survey from the University of Michigan. “Indeed, our forecast anticipates a spike in prices by June and July from the tariffs,” Hanson said.