Despite widespread anticipation that the president’s universal 10% tariff on imports would soon trickle down into consumer prices, inflation continued to decelerate in May, with Consumer Price Index inflation down 20% since President Donald Trump took office. That has translated to a pay raise for workers. After falling more than 4% throughout former President Joe Biden’s administration, real average weekly wages are up 1.3% in the first five months of Trump’s second term.

It’s possible that businesses have a limited ability to eat the cost of tariffs and will eventually have to pass them on to consumers in the form of increased prices. Furthermore, rebound inflation would be nearly guaranteed if Trump reverts to his ill-advised menu of “reciprocal tariffs” after the July end date of the 90-day post-“Liberation Day” pause.

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Thus far, the 13-point increase in the average effective tariff rate on imports since the start of this year simply has not translated into consumer price hikes. By contrast, the inflation data hasn’t looked this good since the last time Trump was president.

Overall prices and the Federal Reserve‘s preferred inflation gauge of core CPI, excluding the volatile categories of food and energy, increased by 0.1% last month. Although core CPI inflation over the past year was 2.8%, core CPI over the past three months at an annualized rate has plummeted to 1.7%, below the central bank’s 2% maximum inflation target.

Again, the specifics of May’s CPI print belie the notion that tariffs are not yet trickling down to consumers. Car and clothing prices both fell by 0.4% last month, while gas fell by almost 3%. The primary upward influence on inflation remains housing prices, which continue to suffer from a zoning-induced dearth of supply.

INFLATION TICKED UP SLIGHTLY TO 2.4% IN MAY, BETTER THAN EXPECTED

The Fed will want some clarity in the White House‘s long-term tariff plans. If Trump does revert to raising import levies across the board, the central bank will correctly want to wait before cutting the federal funds rate from its current level, which is already slightly below the historical average. Given the continued strength of the labor market, Trump would be wise to consider this a blessing in disguise from the Fed, which would then retain a crucial tool in its arsenal in case we actually do face an economic downturn.

But for the White House, it’s not too early to claim victory over the first phase of obliterating Bidenomics’ inflationary scourge and the 1.3% pay raise the average worker has received as a result.