US inflation surges highest since June 2024, complicates Trump’s tariff plans

The headline consumer inflation data released in the U.S. today could complicate U.S. President Donald Trump's big plans to impose tariffs. In January 2025, consumer prices rose to their highest level since June last year on increased prices of housing and food, which also dims the probability of a rate cut by the US Federal Reserve soon.

Experts say if inflation remains high, it will be difficult for the Trump administration to go ahead with its various plans, including tariff agenda and tax cuts. The deportation of illegal immigrants, which they say could cause labour shortages in many areas, is also set to add to inflation woes.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5% on a seasonally adjusted basis in January 2025, after rising 0.4% in December 2024, the U.S. Bureau of Labor Statistics reported today. "Over the last 12 months (ending January 2025), the all-items index increased 3% before seasonal adjustment."

The index for shelter rose 0.4% in January, accounting for nearly 30% of the monthly all items increase. The energy index rose 1.1% over the month, as the gasoline index increased 1.8%. The index for food also increased in January, rising 0.4% as the index for food at home rose 0.5% and the index for food away from home increased 0.2%.

The index for all items less food and energy rose 0.4% in January. Indexes that increased over the month include motor vehicle insurance, recreation, used cars and trucks, medical care, communication, and airline fares. The indexes for apparel, personal care, and household furnishings and operations were among the few major indexes that decreased in January.

The all-items index rose 3% for the 12 months ending January, after rising 2.9% over the 12 months ending December. The statement says all items less food and energy index rose 3.3% over the last 12 months, with the energy index increasing 1% for the 12 months ending January and the food index up 2.5% over the last year.

As Trump gears up to impose 25% tariffs on steel and aluminium imports, Indian steel producers will face increased challenges in exporting their products, according to the ratings agency Moody's Ratings. “We expect the tariffs will benefit steel producers in the US by increasing demand for domestic steel and raising their selling prices. Conversely, the US tariffs on steel will increase competition and exacerbate oversupply in other steel-producing markets. Indian steel producers will face increased challenges in exporting their products. Over the past 12 months, high steel imports into India have already dampened prices and earnings of steel producers in India,” said Hui Ting Sim, assistant vice president, Moody's Ratings.

The headline in India, which also released its CPI inflation data today, fell appreciably sharper to a five-month low of 4.3% in January 2025, led primarily by food items, vindicating the unanimous rate cut effected by the MPC last week.