US wholesale prices dropped 0.5% last month despite President Trump's tariffs

Key Points

• The U.S. producer price index fell 0.5% in April—the first monthly drop since October 2023 and the largest decline in five years—defying expectations that President Trump’s tariffs would push prices higher.
• On a year-over-year basis, wholesale prices rose 2.4% in April, down from a 3.4% gain in March, while core wholesale prices (excluding food and energy) dipped 0.4% from the prior month and climbed 3.1% from a year earlier.
• Services prices plunged 0.7%—the steepest drop on record back to 2009—and wholesale food prices fell 1%, with egg prices tumbling 39% despite remaining nearly 45% above year-ago levels due to bird flu.
• Amid these price moves, Trump agreed to cut tariffs on Chinese imports from 145% to 30%, and China lowered its retaliatory duties from 125% to 10%, though economists say the full impact of tariffs may not emerge until later this summer.

WASHINGTON (AP) — U.S. wholesale prices dropped unexpectedly in April for the first time in more than a year despite President Donald Trump’s sweeping taxes on imports.

The producer price index — which tracks inflation before it hits consumers — fell 0.5% last month from March, the first drop since October 2023 and the biggest in five years. Compared to a year earlier, producer prices rose 2.4% last month, decelerating from a 3.4% year-over-year gain in March, the U.S. Labor Department reported Thursday.

Excluding volatile food and energy prices, so-called core wholesale prices dipped 0.4% from March and rose 3.1% from a year earlier.

Economists had forecast that producer prices rose modestly in April.

Services prices fell 0.7%, the biggest drop in government records going back to 2009, on shrinking profit margins at wholesalers and retailers. Wholesale food prices fell 1%, and egg prices plunged 39%, though they are still up nearly 45% from a year ago because of bird flu.

On Tuesday, the Labor Department reported that consumer prices rose just 2.3% last month from April 2024 — smallest year-over-year gain in more than four years.

Economists have predicted that Trump’s tariffs would drive up prices, and many expect the impact to show up in June or July.

Still, Trump’s tariffs are ever-changing, so it’s hard to forecast their economic impact. On Monday, for instance, Trump unexpectedly agreed to a massive de-escalation of his trade war with China — third-biggest source of U.S. imports — by scaling back his taxes on Chinese products to 30% from 145%; China slashed its retaliatory tariffs on U.S. products from 125% to 10%.

"Tariffs have yet to make much of a mark on pricing, though it’s likely just a matter of time,'' Sal Guatieri, senior economist at BMO Capital Markets, wrote in a commentary.