Don't let Trump's tariff chaos hide the fact that he's winning the war on inflation

According to the Labor Department, the PPI remained unchanged from January

PUBLISHED MAR 13, 2025

While current data suggests easing price pressures, the trajectory of inflation remains uncertain amid escalating trade tensions.

Washington D.C.: US wholesale inflation showed signs of deceleration in February, indicating a temporary easing of price pressures, the Associated Press reported. However, this progress may be short-lived as President Trump escalates his trade wars, potentially reigniting inflationary pressures.

According to the Labor Department, the producer price index (PPI), which measures inflation before it reaches consumers, remained unchanged from January after a 0.6% rise the previous month. Year-over-year, producer prices increased by 3.2%, down from January’s 3.7% gain.

Core wholesale prices, which exclude volatile food and energy costs, fell by 0.1% in February—the first decline since July—while the annual core PPI rose 3.4%, lower than January’s 3.8% increase. These figures fell below economists’ expectations, signaling a potential slowdown in inflationary trends.

Trump has said it was very difficult to sell anything in India and claimed that New Delhi has agreed to slash its tariffs “because somebody is finally exposing them”. — On Thursday, Trump warned of a 200% tariff on European wine, champagne, and spirits if the EU proceeds with tariffs on US whiskey.

The moderation in wholesale inflation comes amid heightened trade tensions. President Trump has imposed a 25% tariff on foreign steel and aluminum and a 20% levy on Chinese imports. He has also threatened to impose 25% tariffs on Canada and Mexico and introduce "reciprocal tariffs" matching higher taxes on US goods by other countries.

On Thursday, Trump warned of a 200% tariff on European wine, champagne, and spirits if the EU proceeds with tariffs on US whiskey. These measures have raised concerns about rising costs for businesses and consumers. Major retailers have already warned that higher prices, partly driven by tariffs, could lead to reduced consumer spending in 2024.

Meanwhile, consumer price inflation also slowed in February for the first time since September. The consumer price index (CPI) rose 2.8% year-over-year, down from January’s 3% increase. Core CPI, excluding food and energy, increased by 3.1% annually, the smallest rise since April 2021. Wholesale gasoline prices fell 4.7% in February, while food prices rose 1.7%, driven by a 28% surge in egg prices.

The Federal Reserve, which cut its benchmark interest rate three times in late 2024, is expected to maintain the current rate at its upcoming meeting. Analysts suggest the Fed is more focused on the potential impact of tariffs on future inflation than on past price increases. Wholesale prices are a key indicator of future consumer inflation, and components like health care and financial services feed into the Fed’s preferred inflation gauge, the personal consumption expenditures (PCE) index.

In February, some PCE-related costs, such as hospital expenses and international airfares, rose more than expected, highlighting ongoing inflationary risks. While current data suggests easing price pressures, the trajectory of inflation remains uncertain amid escalating trade tensions.