The Tariff U-Turn Came Just in Time for Economy

PRESIDENT DONALD TRUMP may have dialed back his tariff experiment just in time — at least if the April economic data is any indication.

- Bloomberg

A report on Tuesday showed that the consumer price index in the US rose just 2.3% in April from a year earlier, less than economists had expected and the coolest year-over-year pace since early 2021. That added to labor market data showing that firms have mostly refrained from large-scale layoffs in the face of the tariff threat, even though hiring has been anemic. In essence, Trump reversed course on his destructive tariff policy before it demonstrably upset the apple cart.

It is early to breathe a sigh of relief, but you can't blame forward-looking financial markets for tepidly doing so. The S&P 500 Index rose another 0.8% on Tuesday and, at the time of writing, was just about 4.2% below its all-time high.

First, consider the inflation outlook. Excluding volatile food and energy prices, the CPI rose just 0.2% in April from the previous month, an objectively decent figure. Bloomberg Economics estimates that the data in hand will translate into a 0.16% increase in the all-important core personal consumption expenditures deflator, which the Federal Reserve monitors closely in the setting of monetary policy.