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China’s Deflation Deepens While U.S. Inflation Rises on Tariff Pass-Through

Beijing’s stimulus has failed to revive consumption as Chinese consumer prices fall for a fourth straight month

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People shop at Fuyoumen Commercial Building in Shanghai, China April 16, 2025. REUTERS/Go Nakamura/File Photo
A drone view shows an Evergreen Marine container ship at a port in Kwai Chung, Hong Kong, China April 16, 2025. REUTERS/Tyrone Siu/File Photo
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Overview

  • China’s consumer price index dropped 0.1% in May, marking four consecutive months of price declines, while factory-gate prices fell 3.3% year-on-year.
  • The People’s Bank of China cut its benchmark interest rates by 10 basis points and lowered the reserve requirement ratio by 50 basis points to support growth.
  • U.S. core consumer prices rose 0.3% in May—the strongest monthly gain in four months—as companies passed higher import duties onto shoppers.
  • On May 12 in Geneva, the U.S. and China agreed to roll back most tariffs in a preliminary deal and have scheduled follow-up negotiations in London.
  • Federal Reserve officials will analyze May’s CPI and producer price data to assess the trade-policy impact ahead of their June 17-18 policy meeting.