Inflation Holds Steady Despite Tariff Concerns, Report Shows

What Happened?

Inflation in the U.S. showed little change last month, as President Donald Trump's tariffs so far have had no impact on everyday purchases by American consumers.

Although consumer prices in May were up 2.4% from a year ago, prices rose just 0.1% month over month — down from 0.2% in April, according to the Bureau of Labor Statistics.

The Consumer Price Index (CPI) was reportedly forecast to rise 2.5% in May.

It marked lower expectations than 0.2% in monthly price gains economists projected.

Forecasters still anticipate that the cost of imposed tariffs will become more evident in the coming months in 2025.

That's due to the Trump Administration's universal 10% tariff that was imposed on nearly everything the U.S. buys from other countries.

That tax rate could increase next month after a 90-day extension window closes for trade negotiations.

Steel and aluminum levies have also increased as one of Trump's latest moves on nearly every country except the U.K.

Federal Reserve governor Adriana Kugler warned that Trump's moves on tariffs could still reverse two years of progress made toward addressing the nation's inflation.

Why it Matters

The CPI report comes after the World Bank has forecast a decline in economic growth this year amid Trump's trade feuds.

Currently, the U.S. would experience slow growth in 2025 (1.4%) compared to 2024 (2.8%), the Washington-based lender revealed.

A downgrade from the 189-country lender's previous forecast that was released in January.

The bank also expects global growth to expand only 0.5% more in 2025 (2.3%) compared to 2024 (2.8%).

It's reportedly the slowest growth rate outside of full-blown recessions encountered in 2008.

World Bank chief economist Indermit Gill warned that the global economy may have missed its chance for a 'soft landing.'

Without swift correction, inflation could soon generate serious pain.

The U.S. dollar has already reportedly fallen more than 8% this year.

But the latest developments between the U.S. and China could steer things in the right direction.

Both countries have held intense negotiations in London since Monday in hopes of agreeing on a new trading arrangement.

Aides to Trump and Chinese leader Xi Jinping agreed in principle to the framework, which would await signatures from the two leaders.

'Our deal with China is done,' Trump said on Truth Social Wednesday.

The framework includes rare earth minerals supplied upfront by China, Chinese students continuing to attend U.S. universities, and a total of 55% tariffs on Chinese imports compared to 10% tariffs on the U.S.

China, which controls 30% of worldwide manufacturing, agreed to 'stabilize the economic relationship' with the U.S., according to Treasury Secretary Scott Bessent.

Trump also suggested Wednesday following the release of the CPI report that the Fed should slash rates ‘one full point.’

‘WOULD PAY MUCH LESS INTEREST ON DEBT COMING DUE,’ he added. ‘SO IMPORTANT!!!’

How it Affects You

The news highlights a step in establishing an economic balance overall between the world's two largest economies.

As the decision to relieve trade tensions is suddenly on the horizon, it could diminish global uncertainties that have contributed to inflation projections.

Both the U.S. and China aim to accomplish key goals despite previous trade levies.

The global economy could soon be back on a positive trajectory to correct rising inflation.

But more importantly, for the U.S., it improves its relationship with China and addresses one of its largest trade deficits.