Trump tariffs hit home: US producer prices see biggest fall in 5 years, Americans worry as recession fears persist

US President Donald Trump may have successfully struck a trade deal with China, easing some restrictions on global trade, but the president’s tariffs are hurting his own country’s economy.

According to data released by the Labour Department’s Bureau of Labour Statistics, US producer prices unexpectedly fell in April as the cost of services declined by the most since 2009, pulled down by ebbing demand for air travel and hotel accommodation.

Economists have long warned that these tariffs could slow economic growth and reignite inflation, potentially pushing the US economy toward a recession.

How producer prices are falling

There is more than just one factor that is affecting America’s production prices. Trump’s protectionist trade policy, immigration crackdown as well as references to Canada as the 51th state and a desire to acquire Greenland have all played a role in holding back tourists from visiting the country.

A 1.6 per cent decrease in trade services, which measure changes in margins received by wholesalers and retailers, accounted for more than two-thirds of the drop in services. Prices for hotel and motel rooms dropped 3.1 per cent after easing 0.5 per cent in March. Portfolio management fees plunged 6.9 per cent, while airline fares fell 1.5 per cent.

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The fall in Producer Price Index (PPI) also indicates companies are absorbing some of the hit from higher tariffs.

The data shows that American manufacturers and service providers have largely held off on passing higher US import duties to consumers. While the impact on consumers has been limited, producers are increasingly strained by steep tariffs on imported materials and inputs.

Walmart and other retailers spike prices

Amid all of this, economists have warned that consumer prices may see a steep uptick in the coming days, with the repercussions of tariffs already being felt directly by buyers.

Walmart and some other retailers have announced price hikes as import duties increase. Goods like fruits, vegetables and furniture will become more expensive, executives have said. “We’re wired to keep prices low, but there’s a limit to what we can bear, or any retailer for that matter,” Walmart Chief Financial Officer John David Rainey told the Associated Press.

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Walmart is the latest major US retailer to announce price hikes linked to tariffs and the trade conflict with China, joining companies like Procter & Gamble and Ford, which have also raised prices on certain products and vehicles.

Americans growing anxious

Economic anxiety is growing among Americans, reflected in sharply slower retail and home sales last month.

Last month, the National Association of Realtors said that home sales in the US dropped 5.9 per cent last month to a seasonally adjusted annual rate of 4.02 million units. Sales fell 2.4 per cent year-on-year in March.

“Home buying and selling remained sluggish in March due to the affordability challenges associated with high mortgage rates,” said Lawrence Yun, the NAR’s chief economist.

Recession coming soon?

Despite US President Donald Trump’s pause on most tariffs, JPMorgan Chase has kept the possibility of recession this year at 60 per cent.

“Combined with the ongoing policy chaos on trade and domestic fiscal matters, along with the still-large losses in equity markets and hit to confidence, it remains difficult to see the US avoiding recession,” said JP Morgan in a report on Wednesday, according to CNN.

With inputs from agencies