MAY 9, 2025
US Gas Prices are still high at the Pump. – Joe Raedle/Getty Images
President Donald Trump has insisted that prices are falling, even as consumers continually express concern about the economy. He has repeatedly attacked Federal Reserve Chair Jerome H. Powell for not lowering interest rates to offset the effects of his trade war. At the same time, he has dismissed concerns about inflation, claiming that “costs are down” and that there is “virtually NO INFLATION.”
The reality is complicated. Though consumer prices were trending down before Trump’s tariffs kicked in last month, data the government collects on the economy has not captured the effects of the tariffs yet and is unlikely to do so until this summer. And while prices for some goods such as oil and gas have come down — as Trump has repeatedly noted — economists say those data points overlook broader trends.
Here’s what to know about inflation and prices for common goods.
What does Trump say is happening?
Trump has highlighted falling prices of a handful of goods to argue that inflation is essentially over, particularly for oil and gas.
“Gasoline is down, energy is down, groceries are down, eggs are down,” Trump told reporters Thursday in the Oval Office.
“All of this stuff is down,” he added.
Are prices really falling?
Economists say Trump has a point, in that some individual products really are seeing a decline in prices.
Since hitting $80 a barrel Jan. 15, West Texas Intermediate crude oil has fallen by nearly 30 percent, hitting $56.69 a barrel early this week, according to Joseph Brusuelas, chief economist at RSM.
In the latest consumer price index report, airfares fell by 5 percent in March compared with February, after falling in February as well. And prices for some food items, like baked goods and cereals, declined slightly in March.
Egg prices aren’t as clear. Agriculture Department data shows that wholesale prices for eggs have fallen significantly this year. That drop hasn’t yet shown up in retail prices as tracked by the Bureau of Labor Statistics, which showed climbing prices for the first quarter of the year. Economists say a decrease in retail prices could be coming, given the drop in wholesale costs.
Does that mean inflation is over?
Not exactly. Trump is largely referring to downward price shifts on individual goods.
That’s not the same as inflation, which is a general increase in prices across the economy. By nearly all metrics, inflation continues to be a concern, though less of one than a few years ago.
The Fed’s preferred gauge of underlying inflation, core personal consumption expenditures — which excludes volatile food and energy prices — rose at a 3.5 percent annual rate in the first three months of the year. That means prices for most goods and services increased by more than the Fed’s 2 percent target. The good news is that the pace of inflation is down from the same period last year.
How do tariffs fuel inflation?
Trump has imposed tariffs of 10 percent on goods exported by most countries around the world, and a tariff of 145 percent on most Chinese goods. Those import taxes are expected to raise consumer prices in the U.S., as manufacturers and retailers face higher price tags for the products and parts they import.
Specifically, tariffs can throw a wrench into the economy by making it harder to produce goods and services, leading to shortages that push prices higher. The chaotic way Trump’s higher import taxes are being rolled out also makes it tough for businesses to plan ahead, with some putting investment decisions on hold until the dust settles.
Some retailers have already raised prices or indicated that they will in response to tariffs. Economists expect higher costs to begin to show up in national data this summer.
Sometimes falling prices can be a warning sign
While tariffs typically push inflation higher by increasing the cost of imported goods, sometimes they can have the opposite effect. By slowing the economy and weakening global demand, they help drive down prices.
That’s been happening for oil lately. Demand is dropping amid economic anxieties triggered by Trump’s trade war. Soaring prices for steel and rig parts are chilling investment. And a surge in pumping by OPEC+ nations — which analysts say is happening in large part because Trump demanded it in his pursuit of lower gasoline prices — is creating a market glut.
“Some of what Trump calls good news, like the falling price of oil, is actually caused by bad news, which is the world expecting the possibility of a global recession,” said Jason Furman, a former economic adviser to President Barack Obama now at Harvard.
What about gas prices?
When oil prices fall, gas prices typically follow. The national average price of gasoline was $3.152 per gallon Thursday, according to AAA. That’s down from $3.186 per gallon the prior week and $3.640 a year ago.
Those figures are much higher than some of the prices Trump has touted. In a commencement address at the University of Alabama on May 1, the president said gasoline was $1.88 in three states. That was false. The lowest May 1 average in any state was about $2.66 per gallon, in Mississippi, according to CNN.
What about auto prices?
Car prices are expected to rise by thousands of dollars because of tariffs that affect the industry’s supply chain. American automakers Ford and General Motors said this week that tariffs will hit their bottom lines.
Jessica Caldwell, head of insights at Edmunds, said she has not seen big price swings in most parts of the industry yet, as automakers deal with uncertainty.
“We are in a wait-and-see pattern,” she said. “We’re not seeing massive price movements as automakers are still trying to figure things out.”
There are signs that used cars are getting a lot more popular as people try to avoid tariffs on new vehicles.
Demand for used cars has surged in the past month at Liberty Subaru in Emerson, New Jersey, as customers shy away from newer cars that are subject to tariffs, owner Rick DeSilva Jr. said. He has a little more than 30 used cars in stock, down from the usual 60, he said.
“As soon as people get priced out of new cars, or even anticipate that they might, they start looking at used ones, and that drives up prices,” DeSilva said.
What does the Fed say?
Unlike during Trump’s first term, inflation is already a major concern for the Fed because prices surged during the pandemic a few years ago and inflation continues to run above the Fed’s target. New price spikes caused by tariffs could lead consumers and businesses to expect higher inflation in the future. That shift in expectations could make inflation harder to bring down. Powell said this week that he expects at least a temporary increase in inflation.
Even if long-term inflation expectations remain anchored and there are no additional effects on wages and other production costs, there could be a one-time increase in prices that pushes the inflation rate up to 3 or 4 percent on an annualized basis, said Steven Kamin, a senior fellow at the American Enterprise Institute.
