Economy keeps momentum as inflation slows

The White House is celebrating a series of economic victories it says demonstrate the effectiveness of Trump trade policies.

May’s Consumer Price Index rose just 0.1% versus analyst expectations of 0.3%, the U.S. Bureau of Labor Statistics reported on Wednesday.

That puts the CPI at 2.4% over the last 12 months, well in line with the Federal Reserve target for inflation.

However, ahead of the news various wire services reported CPI would rise substantially in May based on Trump tariffs, leading to updated stories reflected subdued inflation numbers.

For example, on Tuesday the Associated Press trumpeted “First signs of tariffs’ impact on inflation could appear in Wednesday’s consumer prices report.” But the new headline is: “Inflation rose slightly last month as grocery prices ticked higher.”  

Trump called on the Federal Reserve to lower interest rates by a full 100 basis point in the wake of the CPI news, which would lower U.S. interest payments on the national debt.  

That could save around $64 billion this year and, as debt is refinanced, as much as $131 billion annually. 

The inflation number is especially impressive as the economy shows signs of second quarter growth by 3% to 4%. 

Soon after the inflation data was published, Trump announced a trade deal with China is substantially done.  

The president said that the U.S. will get rare earth minerals and magnets from China, while tariffs on Chinese goods will remain at 55%. In return, the U.S. will allow Chinese students to still attend American universities, according to a post made by the president on social media. 

Trump said final approval is pending. 

The urgency to the deal was likely boosted as the World Bank indicated it agreed with the Trump administration’s position that other economies take advantage of low tariffs for American goods. 

“This favorable access to the U.S. market could not be sustained indefinitely,” said Indermit Gill, the World Bank’s chief economist, who essentially echoed Trump’s position tariffs should be reciprocal, reported the Washington Post. 

It was a point Trump made right after his second inauguration.  

“They’ve charged us, and we haven’t charged them. And it’s time to be reciprocal. You’ll be hearing that word a lot. Reciprocal. If they charge us, we charge them,” Trump told reporters in February. “If they’re at 25 [percent], we’re at 25. If they’re at 10, we’re at 10. If they’re much higher than 25, that’s where we are too.” 

Meanwhile, on Tuesday a federal appeals court reversed a lower court’s ruling that blocked the implementation of the tariffs, pending an expedited review of the case, according to Fox News. 

The case is expected to be heard by an en banc group of judges at the end of July, which then could decide the case on behalf of Trump or scuttle the tariffs entirely. 

In either event, the issue was likely to appear before the U.S. Supreme Court before the case is finally settled. 

“The Trump administration is legally using the powers granted to the executive branch by the Constitution and Congress to address our country’s national emergencies of persistent goods trade deficits and drug trafficking,” White House spokesman Kush Desai told Fox. “The US Circuit Court of Appeals’ stay order is a welcome development, and we look forward to ultimately prevailing in court.”