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Investing.com-- Chinese consumer inflation shrank more than expected in March, reflecting some headwinds for local spending from a steadily escalating trade war with the U.S., while producer inflation also declined.
Consumer prince index inflation fell 0.1% year-on-year in March, government data showed on Thursday. The reading was worse than expectations that inflation would remain steady after a 0.7% drop in February.
CPI shrank 0.4% month-on-month, more than expectations it would contract 0.2%.
The softer inflation reading reflects some headwinds for the Chinese economy from increased U.S. trade tariffs. U.S. President Donald Trump had in early-March raised tariffs on Chinese goods to 20%, drawing retaliatory tariffs from Beijing.
Tariffs are usually borne by local importers, with Beijing’s tariffs on the U.S. likely stifling some local spending.
The tariff exchange appeared to have offset some tailwinds for local consumption from a swathe of aggressive Chinese stimulus measures doled out since late-2024.
The U.S.-China trade war also saw a major escalation this week, with Trump hiking tariffs on China to an unprecedented 125%. Beijing retaliated with a 84% levy on U.S. goods, and threatened more action.
April’s inflation data is likely to yield more cues on the impact of the heightened tariffs, as is trade data due later in April.
China PPI inflation shrinks for 30 consecutive months
Chinese producer inflation contracted for a 30th consecutive month as local businesses remained under pressure, with a brewing trade war set to provide even more headwinds to export-heavy sectors.
Producer price index inflation shrank 2.5% y-o-y in March, more than expectations for a drop of 2.3% and worsening from the 2.2% decline seen in February.
Producer inflation has steadily fallen amid weak local and external demand for Chinese goods, with higher input costs doing little to deter this trend.