Here’s the inflation breakdown for April 2025 — in one chart

In a recent report from the Bureau of Labor Statistics, it was revealed that inflation in the United States has once again taken a dip in April. This drop in inflation can be attributed to lower prices for essential consumer goods such as groceries, gasoline, used cars, and clothing. The consumer price index, a key measure of inflation, rose by 2.3% in April compared to the previous year, down from 2.4% in March. This marks the smallest annual increase since February 2021, just before the onset of pandemic-induced inflation.

Economists are cautious about celebrating this decline in inflation, as they predict that the tariffs imposed by former President Donald Trump could reignite inflation in the near future. Mark Zandi, chief economist at Moody’s, warned that the impact of tariffs on inflation could be seen as early as the next CPI report in May. With tariffs being a tax on imports from foreign countries, U.S. companies are expected to pass on the additional costs to consumers through higher prices.

A recent report from the Yale Budget Lab estimated that the tariffs currently in effect could cost the average U.S. household an additional $2,800 in the short run. The speed at which companies raise prices in response to tariffs may vary, with some opting to wait until their non-tariffed inventory runs low before increasing prices. Economists suggest that a 10% average tariff rate could add up to 1 percentage point to the consumer price index after six to nine months.

Despite a temporary trade deal with China, economists predict that core CPI inflation could rise to 3.5% by the end of 2025. This uncertainty surrounding tariffs and trade policies remains a significant question mark for the inflation outlook. The impact of tariffs was already evident in the recent CPI report, with some goods seeing price increases attributed to tariffs.

While gasoline prices have decreased due to falling oil prices, other consumer goods like groceries, used cars, and apparel have also seen price declines. Inflation for housing, the largest component of the CPI, remains elevated at 4% annually. Overall, inflation for services has gradually declined, thanks to factors such as housing costs, a stable labor market, and calmer goods inflation.

As the U.S. navigates through the complexities of trade policies and tariffs, the effects on inflation remain a key concern for economists and consumers alike. The future trajectory of inflation will largely depend on how these factors play out in the coming months.