On Tuesday night, Beijing time, the U.S. Bureau of Labor Statistics released April CPI data slightly lower than market expectations. But the market agreed that although the CPI data fell to the level before the last round of severe inflation in the United States, the impact of "Trump tariffs" will sooner or later appear in the data in the next few months.

The report shows that the US CPI rose 2.3% year-on-year in April, expected to be 2.4%, a month-on-month increase of 0.2%, which is also slightly lower than expected; the core CPI removed energy and food increased by 2.8% year-on-year, in line with expectations, and a month-on-month increase of 0.2%, lower than the expected 0.3%.

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The 2.3% CPI and 2.8% core CPI are also the lowest since the beginning of 2021 . People at that time did not realize that the "joint release" between the US government and the Federal Reserve would eventually lead to severe inflation that lasted for many years.

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(Source: Investing)

After the data was released, the market response was relatively flat, and the logic behind it was expected that the price increase caused by tariffs would come sooner or later . As of Tuesday's opening of US stocks, the three major indexes rose and fell, and the 10-year US Treasury yield remained at a recent high of 4.45%.

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(U.S. 10-year Treasury yield, source: TradingView)

The tariff shock has not yet been clearly revealed

It is worth mentioning that the "fall in egg prices" that Trump frequently boasts is indeed one of the reasons why the data is lower than expected.

Data shows that food prices fell by 0.1% month-on-month in April, with groceries prices falling by 0.4% month-on-month, the largest drop since September 2020. Prices have also dropped in categories such as meat, eggs, breakfast cereals, and baked goods.

Among them, egg prices fell by 12.7% in a single month, the largest single-month decline since 1984. But it is obvious that this is a pullback after the sharp surge in egg prices, and the year-on-year increase in egg prices still reached 49.3%. In addition, the prices of frozen fruits and vegetables fell by 3% month-on-month, the largest drop in history.

The inflation data for April was lower than expected, which also showed that tariffs were not so fast to overall prices . At the same time, since traders such as Walmart have been clearing out stocks and selling stocks hoarded in advance, it is too early to judge the impact of tariffs.

In the April CPI, the prices of new cars did not rise as expected, but the prices of furniture and home appliances, mainly composed of imported goods, have jumped, such as audio equipment jumped 8.8% in a single month . In addition, housing costs, a "stubborn disease" of US inflation, accelerated by 0.3% in April. This part of the rise is offset by the price drop in optional consumption items such as air tickets and hotels, reflecting the multifaceted nature of tariffs "pushing up commodity prices and curbing service consumption . "

Even after the Geneva talks, the current tariff level in the United States is still the highest since the 1930s .

Therefore, even if "tariff inflation" does not appear in April, it may be reflected from the end of the second quarter to the third quarter. In recent weeks, a number of automobiles, daily necessities and food manufacturers have issued price increases warnings to the US market.

Ali Jaffery, senior economist at the Canadian Imperial Commercial Bank, explained to the media that tariffs are unlikely to have much impact on April data, because this is the first month of the US's global tariff policy, while companies are also able to remain patient with healthy inventory and profit margins.

Jaffery also warned that even if the U.S. suspended some of the ultra-high tariffs imposed on China, the current tariffs are still significantly higher than before the trade war began, and some of the costs may still be passed on, although the process may last longer.

David Kelly, chief global strategist at JPMorgan Asset Management, also pointed out that it is not only tariffs that affect the direction of CPI, but also fiscal stimulus measures promoted by the Trump administration. Tariffs will stimulate inflation in the short term, and by 2026, inflation will rise further due to a new round of stimulus measures. He expects the yield on the U.S. 10-year Treasury bond will fluctuate between 4.5% and 5%.

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