Over the course of April, President Donald Trump imposed large tariffs on goods from every country in the world, pushing America’s average levy on imports to its highest level in roughly a century.

And inflation slowed.

In April, the Consumer Price Index (CPI) rose at a 2.3 percent annual rate, its slowest pace since early 2021, according to a federal report released Tuesday morning. Economists had expected that figure to be 2.4 percent. Markets rallied on this happy surprise.

Meanwhile, the Trump administration lowered its tariffs on China on Monday, bringing its levy on Chinese imports down from 145 percent to 30 percent for 90 days, as the two countries work toward a permanent agreement. China, in turn, lowered its retaliatory tariff on American goods from 125 percent to 10 percent.

Americans might look at these two developments and wonder: Does this mean the economy is going to be fine? Is Trump’s manufactured economic crisis ending before it even began?

No one can answer these questions with certainty. What we do know is:

• Trump’s trade war is still poised to raise prices and slow growth later this year.
• The risk of a severe economic crisis has fallen significantly.

Price hikes are still coming

Tariffs reliably increase consumer prices. When companies are forced to pay higher prices for foreign goods and imports, they generally pass on at least part of that cost to their customers.

Given this, why didn’t April’s tariffs translate into higher inflation?

The primary explanation is that US companies stocked up on foreign goods and inputs earlier this year, in anticipation of Trump’s tariffs. So, they’ve been able to keep prices low by drawing down on those inventories. As Morgan Stanley’s chief economist, Michael Gapen, told the

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