US Wholesale Prices Likely Decreased in April Amid Tariff Fears
First quarter uncertainties over Trump policies suppressed trade as businesses awaited clear trends
U.S. wholesale prices likely decreased in April as businesses awaited the direction of President Donald Trump’s waffling trade policies. The uncertainties that accumulated since Trump’s return to the White House for his second nonconsecutive term.
In the Producer Price Index (PPI) report that the Bureau of Labor Statistics is scheduled to release Thursday (May 15), the market expects a slight fall.
The PPI may not reflect a reversal of the declining trend that the latest Consumer Price Index report released Tuesday showed as consumers wanted to stock up on essentials ahead of the feared price escalation from international tariff action. The key inflation index rose by 0.2% in April, after declining in the previous couple of months. The trend reversal might have added grist to Federal Reserve chief Jerome Powell’s stand against an immediate interest rate cut that Trump was pushing for. Powell has been ruling out interest rate cuts until the inflation is brought down closer to the target of 2%. The CPI bump up was largely caused by the increase in shelter and energy indexes.
In March, the Producer Price Index for final demand decreased 0.4%, seasonally adjusted. Final demand prices increased 0.1% in February and 0.6% in January. On an unadjusted basis, the index for final demand advanced 2.7% for the 12 months ended in March.
Trade wars trigger tariff uncertainty
Over 70% of the decrease in the index for final demand in the month can be traced to prices for final demand goods, which fell 0.9%. The index for final demand services declined 0.2%.
Businesses have faced tariff uncertainty throughout the Jan-Apr period after Trump returned to the White House for his second term as President. On April 2 he declared what was claimed to be the Liberation Day when the U.S. was expected to become free of huge trade imbalance with some other major economies including China, Japan, the EU, Canada and Mexico. After declaring a base level of 10% tariff on imports of almost all nations and varying reciprocal tariffs. Trump kept the reciprocal tariffs suspended granting time for negotiations to reach bilateral agreements. The markets were even more violently hit when Trump and China’s Xi Jinping went on a tariff ping pong that resulted in China imposing 125% tariffs on imports from the U.S. and Washington imposing 154% tariffs on imports from China. The situation eased when Trump paused the tariffs for 90 days to leave space for trade talks. The markets have roared back after the Trump Administration announced reaching a trade deal with China and pausing the tariffs for another 90 days.
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