Inflation Remains Steady Despite Tariff Jolt: Early Calm After ‘Liberation Day’ 

Inflation Remains Steady Despite Tariff Jolt: Early Calm After ‘Liberation Day’ 

In the wake of President Trump’s sweeping “Liberation Day” tariffs, financial markets braced for a surge in inflation. The measures, enacted on April 2, 2025, imposed baseline duties of 10%, with targeted levies reaching up to 125% on specific imports. This dramatic restructuring of trade policy stirred immediate concern that prices across the U.S. economy would spike. Yet, in a turn that has surprised many economists, inflation has held remarkably steady. 

The consumer price index rose just 2.3% year-over-year in April—the lowest rate since 2021—and crept only slightly higher to 2.4% in May. Producer prices mirrored this calm, with annual increases holding near 2.6%. The core inflation rate, which strips out volatile food and energy costs, remained around 2.8%. These figures suggest that, at least in the short term, the tariffs have not delivered the inflationary shock many feared. 

Retailers, for their part, have been adapting swiftly. Costco, for example, reported only modest price increases across its tracked inventory. By leaning on domestic sourcing and reshuffling imports, the company managed to shield customers from the immediate impact. Broader retail data suggests consumers remain resilient, with steady spending outside of the auto sector helping offset any inflationary undercurrents. 

The Federal Reserve has taken a cautious approach. With rates hovering near 4.4%, policymakers appear content to wait before making any major adjustments. Although the inflation picture is stable, many Fed officials remain watchful of potential delayed effects. Some analysts believe that tariffs could add up to 0.2 percentage points to inflation later in the year, particularly if businesses begin passing on costs as existing inventories deplete. 

Economists from institutions like J.P. Morgan and Oxford Economics warn that the current stability may not last. Models suggest the cumulative effect of tariffs could push inflation upward by as much as 1% over time, depending on how widely and quickly costs are passed through. While the initial data paints a reassuring picture, the longer-term dynamics remain fluid and highly sensitive to global supply chain adjustments. 

Still, the early verdict is encouraging. Despite the aggressive tone of the “Liberation Day” policies and the scale of tariff implementation, consumer prices remain under control. The anticipated storm has not yet arrived. Whether this is the calm before inflationary winds pick up—or a sign that businesses and consumers have adapted more quickly than expected—remains to be seen. 

At PW Harvey & Co., we continue to monitor these developments closely. The measured response of inflation so far provides welcome breathing room for investors and households alike, but vigilance is warranted. The full economic consequences of this new trade era will unfold over time, and preparedness remains the most prudent course. 

References 

Associated Press. (2025, June 12). 

Inflation barely rose last month as cheaper gas and cars offset some costlier imports. https://apnews.com/article/b0f098351a1f3f850a4c20b215556027 

Associated Press. (2025, June 14). ‘Purgatory:’ Fed officials left in limbo as tariffs complicate this week’s rate decision. https://apnews.com/article/43fd4506f5303537bb0ef8c34fb18112 

MarketWatch. (2025, June 13). Tariff-driven inflation hasn’t hit everyday life yet — but it will, economists insist. Here’s why. https://www.marketwatch.com/story/tariff-driven-inflation-hasnt-hit-everyday-life-yet-but-it-will-economists-insist-heres-why-377a1b61