U.S. Wholesale Inflation Stalls, But Trump’s Trade War Poses a Risk

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U.S. Wholesale Inflation Stalls, But Trump’s Trade War Poses a Risk/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ U.S. wholesale inflation remained unchanged in February, signaling a temporary easing of price pressures. Core wholesale prices dipped 0.1%, the first decline since July, suggesting inflation may be moderating. Trump’s escalating trade war, including new tariffs on steel, aluminum, and imports from Canada, Mexico, and China, could reignite inflation in the coming months.

File – A worker guides a pallet of goods to a display spot in a Costco warehouse on July 8, 2022 in Thornton, Colo. On Friday, the Labor Department releases the producer price index for July, an indicator of inflation at the wholesale level. (AP Photo/David Zalubowski, File)

Wholesale Inflation Stalls in February, But Trade War Threatens Rebound – Quick Looks

Flat Inflation Reading: The Producer Price Index (PPI) was unchanged from January, after a 0.6% rise the month before.
Core Prices Decline: Excluding food and energy, core producer prices fell 0.1%, marking the first decline since July.
Year-Over-Year Inflation Cools: Producer prices rose 3.2% from a year ago, slowing from January’s 3.7% increase.
Tariffs Could Disrupt Progress: Trump’s tariffs on steel, aluminum, and Chinese imports—along with new planned levies on Canada, Mexico, and Europe—could drive inflation back up.
Egg Prices Surge: Wholesale egg prices jumped 28%, while gasoline prices fell 4.7%, contributing to the overall inflation slowdown.
Fed Rate Decision: The Federal Reserve is unlikely to cut interest rates next week, citing ongoing risks from tariffs and trade disputes.
Retailers Sound the Alarm: Major retailers warn that higher costs from tariffs may force U.S. consumers to reduce spending.

Deep Look: U.S. Wholesale Inflation Holds Steady, But Trump’s Trade Policies Pose Risks

Wholesale Inflation Remains Flat in February

The latest Producer Price Index (PPI) data from the Labor Department showed that U.S. wholesale inflation stalled in February, providing temporary relief from rising costs.

Month-over-month inflation stayed at 0.0%, following a 0.6% increase in January.
Year-over-year wholesale inflation eased to 3.2%, down from 3.7% in January.
Core wholesale prices (excluding food and energy) dropped 0.1%, the first decline in seven months.

This cooling in producer prices suggests that some inflationary pressures may be easing, at least for now.

Trump’s Tariffs Could Reverse Inflation Gains

Despite the moderation in inflation, President Donald Trump’s escalating trade war could push prices back up in the coming months.

Trump has already imposed 25% tariffs on steel and aluminum imports.
A new 20% tariff on Chinese goods is in place, with plans for 25% tariffs on imports from Canada and Mexico starting in April.
Trump threatened a 200% tariff on European wine and spirits, retaliating against the EU’s planned tariffs on U.S. whiskey.

“The Fed is now more focused on the impact of tariffs on future food prices than on past price changes,” said economists Carl Weinberg and Mary Chen of High Frequency Economics.

Retailers and Consumers Brace for Higher Prices

Major U.S. retailers warned that consumers might cut spending due to the higher costs resulting from Trump’s tariffs.

Tariffs typically increase the price of imported goods, which raises costs for businesses and pushes prices higher for consumers.
Some economists fear the tariffs could undo the recent slowdown in inflation, leading to a return of price hikes across multiple sectors.

Egg Prices Soar While Gasoline Drops

Egg prices skyrocketed 28% in February, driven by supply shortages linked to avian flu outbreaks.
Gasoline prices fell 4.7%, helping offset other inflationary pressures.

These fluctuations underscore the volatility in food and energy prices, which could impact future inflation trends.

What’s Next for the Federal Reserve?

With inflation showing signs of easing, the Federal Reserve is unlikely to cut interest rates at its meeting next week.

The Fed cut rates three times in late 2024, but policymakers are taking a wait-and-see approach due to the uncertainty surrounding tariffs.
Some analysts believe future rate cuts could be off the table if trade disputes cause inflation to spike again.

“The Fed will not see any argument for pushing interest rates lower,” said Thomas Ryan of Capital Economics.

Will Inflation Stay Low? Tariffs Hold the Answer

While February’s flat inflation reading offers temporary relief, the next few months will be critical in determining whether Trump’s trade policies reignite price pressures.

If tariffs remain in place, businesses may pass higher costs onto consumers, pushing inflation back up.
If trade tensions ease, inflation could continue cooling, leading to a more stable economic outlook.

For now, Americans will be watching closely as Trump’s economic policies unfold, impacting prices at the grocery store, gas pump, and beyond.