After a four-year vacation spent spinning the worst inflation in 40 years as “transitory” and then trying to absolve former President Joe Biden of his responsibility for creating the crisis, the economic prodigies at NBC News and the Washington Post have decided that inflation matters again. Both newsrooms have created highly publicized databases to track food prices, with the latter gleefully anticipating that “the most likely shift in prices during President Donald Trump‘s second term will be upward.”
Not only have food prices effectively flat-lined, but Trump has thus far been successful in rectifying the inflation that was indeed manufactured by Biden’s reckless fiscal policy, both in his legislation and unilateral cancellation of $620 billion of outstanding student loan debt.
It is true that if Trump had executed his “reciprocal” Liberation Day tariff schedule and charged imports from key allies and trading partners such as Vietnam and Cambodia nearly 50%, the resulting tax hike on consumers would have produced damaging rebound inflation. But Trump heeded the distress signal from the bond market and wisely paused the tariffs for 90 days, pivoting away from autarky and pursuing new trade deals instead.
So, four months into Trump’s second term, he has received mostly good marks on inflation, even including the April data that should reflect the preliminary 10% universal tariffs.
On a three-month annualized basis, consumer price index inflation fell to 1.6%, and the Federal Reserve’s preferred gauge of core CPI inflation, which excludes the volatile categories of food and energy, has fallen to 2.1%. That’s in line with the central bank’s maximum inflation target of 2%.
NBC News’s ostensible grocery price tracker only includes six specific grocery items and compares them to their price a year ago. This makes it seem as though it’s some sort of “gotcha” that a dozen eggs today are $1.72 more than when Biden was letting the bird flu spin out of control. And the Washington Post even more ridiculously claims that “breakfast” is 6% more expensive since January because of avocado toast. But once again, this is belied by the data.
Overall food prices, which rose 24% under Biden, have increased 1.75% on an annualized basis in the first three months of Trump’s second term. CPI inflation for food at home — grocery inflation — has fallen to one-fifth of a percentage point on a three-month annualized basis, with nearly a half-point decline in actual prices in April.
Even though the universal 10% tariffs and temporary triple-digit tariffs on China amounted to an effective tariff rate of 28%, the highest burden on American consumers since 1901, producer price index inflation has still moved in the right direction. After the preliminary trade deals with China and the United Kingdom, our effective average tariff rate has fallen to 16%, according to the Yale Budget Lab.
The PPI, which rose 22% under Biden, has actually fallen in the last three months, with core PPI inflation falling to zero. The data indicate that effective tariffs were modest enough that producers could absorb the costs in their margins without passing them on to consumers.
Of course, if, at the end of the 90-day pause due in July, Trump decides we actually need to tariff imports from India and Japan by more than 20%, that will likely come at a dramatic cost to the consumer. Walmart has already warned that the practical deadline is realistically sooner. The retailer that operates on famously thin profit margins says, absent more trade deals to reduce tariff rates, Walmart will have to pass some costs onto consumers in weeks, not months.
In absolute terms, Trump’s first four months in office have seen marked success over inflation. According to the Fed, the 20% tariff imposed on China in February and March contributed to a less than one-tenth of a percentage point increase in core personal consumption expenditure prices. So, it logically follows that Trump’s recent deal to drop tariffs on Beijing back down to 30% will have similarly modest effects on the overall inflation borne by consumers.
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None of this is to say that the war on inflation is over or that Trump can’t get in his own way. Core inflation remains slightly above that 2% benchmark on a 12-month annualized basis. Given the instability triggered by Trump’s shifting goal posts on the trade war, the Fed will correctly want to see more evidence proving that inflation is persistently trending below 2%. And much of the investor and business optimism over the economy is contingent on Trump continuing to broker imminent trade deals.
But as of right now, the data is as good for Trump as it was bad for Biden: the 47th president is indeed reversing some of the inflation wrought by the 46th. If he brings the trade war to an end, he can likely vanquish the scourge of Bidenomics once and for all.