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According to the latest data, CPI increased by 2.8% year-over-year in February, lower than January's 3% and the market expectation of 2.9%. The monthly growth rate dropped from 0.5% in January to 0.2%, also below the expected 0.3%. Core CPI saw a year-over-year decrease from 3.3% to 3.1%, while the monthly rate fell from 0.4% to 0.2%. These figures indicate a moderation in inflationary pressure, partly due to declining housing costs, used car prices, and transportation service costs. Key insights include:
Overall PPI
The annual PPI growth rate stood at 3.2%, slightly below the market expectation of 3.3%, while the monthly growth rate remained flat at 0%, significantly lower than the expected 0.3%.
Core PPI
Excluding volatile food and energy components, core PPI growth fell to 3.4% year-over-year, while the monthly figure turned negative at -0.1%, both below market expectations.
These figures suggest that despite tariff-related cost pressures on some businesses, the overall cooling of the U.S. economy has limited their ability to pass costs onto consumers. Additionally, a sharp decline in energy prices, particularly for gasoline and household natural gas, has helped alleviate pricing pressures in the production sector.
Although data suggests inflation is slowing, market volatility remains high. Consumer confidence has weakened due to concerns that tariffs may drive prices higher in the future. Fluctuations in U.S. commodity prices have made consumers more cautious in their spending, while some businesses have begun stockpiling supplies in anticipation of further cost increases.
U.S. equities experienced a brief rally following the data release but quickly gave up some gains. While inflation figures were better than expected, concerns persist that tariffs could drive prices up, potentially slowing economic growth. Some analysts warn that prolonged tariff pressure may restrict the Federal Reserve’s ability to cut interest rates in response to signs of economic downturn.
With the global economy still in recovery mode and supply chains being restructured, some firms are struggling to fully pass on tariff-related costs to consumers. This limits inflationary pressures from the cost side but also squeezes corporate profit margins, potentially dampening investment decisions. Overall, while data indicates a cooling U.S. economy, uncertainties surrounding tariffs and the slow recovery of global markets continue to pose significant risks to consumer prices and corporate profitability.
Since taking office, the Trump administration has frequently employed a "carrot-and-stick" approach to tariffs, imposing sanctions on China, Canada, Mexico, and the European Union (EU) in an attempt to address trade imbalances and boost domestic industry competitiveness. Recently, the EU retaliated against U.S. steel and aluminum tariffs, further escalating the trade conflict:
The U.S. raised tariffs on steel and aluminum to 25% and removed some trade partner exemptions. This move triggered strong opposition from several allies, including the EU. In response, the EU imposed counter-tariffs on $28 billion worth of U.S. goods, escalating tensions. As a retaliatory measure, former President Trump threatened a 200% tariff on European wine, champagne, and spirits, particularly targeting France, Italy, Spain, and Portugal. He justified this move as beneficial to the U.S. wine industry. However, this high tariff announcement not only heightened concerns about escalating trade disputes but also dampened investor sentiment.
Trump’s tariff threats have triggered immediate market reactions. European liquor companies such as France’s Remy Cointreau Group and Pernod Ricard saw their stock prices drop by over 11% and 7%, respectively. Meanwhile, U.S. liquor companies, such as Jack Daniel’s producer Brown-Forman, also experienced volatility. Despite a brief uptick, the overall trend remained downward.
The U.S. and the EU are crucial trade partners. If European alcohol faces high tariffs, it will directly disrupt trade balance. Prices for EU wine, champagne, and spirits in the U.S. would surge, weakening their competitiveness. At the same time, retaliatory tariffs could pressure U.S. alcohol producers by reducing consumer purchasing power and causing supply chain disruptions, further impacting the overall consumer market.
Amid growing global trade uncertainty, successive tariff battles and retaliatory measures have significantly eroded market confidence. Investment banks such as Goldman Sachs and JPMorgan have raised their recession risk forecasts for the U.S. Some investors believe that persistent trade tensions may push the U.S. economy toward a downturn, prolonging global market stagnation.
The tariff dispute has evolved into a dynamic battle of “attack and defense” between the U.S. and the EU. The administration’s tariff stance has oscillated from unilateral imposition to retaliatory measures, then to threats of extreme levies on European alcohol. This unpredictability makes it difficult for markets to anticipate policy risks. Additionally, Trump's advocacy for "reciprocal" tariffs suggests that pressure on other trading partners may intensify, further escalating global trade conflicts.
The EU has not remained passive in response to U.S. tariff threats. It has announced phased counter-tariffs set to take effect from early April, targeting multiple U.S. products while keeping negotiations open. European Commission President Ursula von der Leyen emphasized that these countermeasures would be executed in two phases and reaffirmed a preference for resolving disputes through diplomatic negotiations.
As trade conflicts could further disrupt global supply chains and consumer prices, market expectations remain cautious. Given ongoing U.S. stock market volatility, rising risks of a government shutdown, and other macroeconomic uncertainties, both investors and businesses are likely to adopt conservative strategies until policy directions become clearer.
