Another Ominous Sign for the Economy

President Trump arrived in Beijing today for his high-stakes summit with Chinese President Xi Jinping, set to take place tonight. He was welcomed by Chinese officials, a military band, an honor guard and hundreds of children waving flags, making for the kind of pageantry and spectacle that the president is known to enjoy. The president was accompanied on Air Force One by Secretary of State Marco Rubio, Defense Secretary Pete Hegseth and U.S. Trade Representative Jamieson Greer, among other officials - and by Tesla and SpaceX CEO Elon Musk, Nvidia CEO Jensen Huang and Eric Trump, who heads the Trump Organization.

Here's what else you should know tonight.

Wholesale Inflation Soars in an Ominous Sign for US Economy

Wholesale prices rose 1.4% in April, the largest monthly increase since a 1.7% jump in the pandemic-ridden days of March 2022, the U.S. Bureau of Labor Statistics reported Wednesday. On a year-over-year basis, the Producer Price Index rose 6.0%, the largest annual surge since a 6.4% rise in December 2022.

The results were well above expectations, with the monthly number running twice as high as the 0.7% rate recorded in March.

The PPI, which measures prices recorded by domestic producers for their output, is seen as a leading indicator of inflation, and the April results suggest that there is a lot more inflationary pressure in the pipeline that can be expected to show up in retail prices in the coming months.

The surging cost of energy was the prime driver of producer price increases, just as it was for the big jump in consumer prices in April that we told you about yesterday. The producer index reflects a wider array of goods and services than the consumer index, and today's results indicate that higher energy prices are spreading throughout the economy as companies move to pass on higher costs for all kinds of products, ranging from plastics and car tires to processed foods and toothpaste.

What the analysts are saying: The "report suggests that while the move higher in prices received by producers is primarily being driven by energy, we are also seeing a broader increase across other core components of the inflation basket," financial analyst Richard de Chazal of William Blair wrote in a research note, per Axios.

Nationwide senior economist Ben Ayers said he expects the inflationary surge to continue, with consumer inflation rising to 4% as soon as next month. "The jump in input prices portends further increases for consumer prices in May," he wrote in a research note cited by CNN.

What it means for the Fed: The Senate voted Wednesday to confirm Kevin Warsh as the new chair of the Federal Reserve. The latest price index data suggests that he will have his hands full dealing with rising inflation.

"This report will set off alarm bells at the Fed and add fuel to the political conversation about affordability," said Carl Weinberg, chief economist at High Frequency Economics, per the Associated Press. "The results are so far above expectations that this update will set off alarm bells in the financial markets, too."

That could be a difficult situation for Warsh, who was nominated to the post by a president who has demanded rate cuts by the central bank - and who was confirmed as Fed chair today by the narrowest margin on record in a 54-45 vote, due in part to fears that he will be too deferential to President Trump's demands. Although cutting the Fed's benchmark interest rate seems unlikely at this point, given the recent inflation data, if Warsh seeks to do so in the near future, he may have difficulty convincing his fellow board members to go along.

Boston Fed President Susan Collins said Wednesday that while she thinks the underlying inflation trend is still downward, as it was before Trump's tariffs and war against Iran, there is a growing chance that the fundamentals may change. The probability of a return to the downward trend once the war ends "has declined," she told The Wall Street Journal, "and some of the other scenarios are less benign than that and certainly could feature higher, more persistent inflation."

Although it's still not her leading expectation, Collins said the central bank may need to raise interest rates if the inflationary surge broadens in the coming months.

Quote of the Week: Trump's Revealing Remark

"Not even a little bit. The only thing that matters when I'm talking about Iran, they can't have a nuclear weapon. I don't think about Americans' financial situation. I don't think about anybody. I think about one thing: We cannot let Iran have a nuclear weapon. That's all. That's the only thing that motivates me."

• President Trump, seeming to downplay Americans' pocketbook concerns and economic hardships in remarks to reporters on Tuesday before leaving for China.

Trump was asked by a reporter to what extent Americans' financial situations are motivating him to make a deal in negotiations with Iran. His response repeatedly emphasized that Iran can't have a nuclear weapon, which he said was more important than people's finances or whether the stock market goes up or down.

"What about the pressure on Americans and prices right now?" Trump was asked.

"Every American understands," he insisted.

It's only Wednesday, but we're calling this our "Quote of the Week" because it's likely to continue to resonate politically for quite some time as Democrats look to hammer the affordability issue ahead of the midterms and Republicans worry about whether the White House is focused enough on pocketbook concerns.

The president's comments provided plenty of fresh political fodder for Democrats and had Republicans including Vice President JD Vance and House Speaker Mike Johnson rushing to explain what he said and what he really meant.

"Donald Trump has made clear that he and the Republican Party don't give a damn about the personal finances of the American people," House Democratic Leader Hakeem Jeffries said today, blaming GOP policies and Trump's war in Iran for rising costs.

Johnson insisted that Trump does think about Americans' financial situations. "We talk about it constantly," the speaker told reporters.

Op-Ed of the Day: Cuts to Cancer Research

In The New York Times, Zain Habboo, a nonprofit executive who lost her son to pediatric cancer, takes the Trump administration to task for cutting research funding:

"That path to curing pediatric cancers is closing. Not because we have run out of ideas or new treatments to try, but because the Trump administration made a choice to cut funding for pediatric cancer research and undermine the institutions that once made America the envy of the world when it came to health innovation. ...

"I want to be precise about this, because the administration will be precise in its denials: There is no single executive order that says 'we are cutting childhood cancer research.' What there is instead is death by a thousand cuts, each one individually deniable, collectively lethal. A proposed cap on indirect costs for research that would make clinical trials impossible to run. Mass layoffs and resignations at the N.I.H. that have gutted institutional knowledge. Grant freezes. A leadership vacuum at the very agencies charged with saving children's lives.

"Children will die from this. Not metaphorically. Not eventually. Children who are sick right now, whose parents are scanning clinical trials the way I once scanned them, will find those trials closed."

Read more at The New York Times.

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Fiscal News Roundup

• US and China Seek to Repair Damage From Tariff War That Sent Trade Into a Freefall – Associated Press
• Republican Resistance to Iran War Grows in the Senate as Murkowski Flips – Associated Press
• Producer Prices Shot Up 6%, Adding Pressure on Companies to Hike Prices for Struggling Customers – Associated Press
• Beer Demand Stumbles as Gas Prices Surge, Data Show – CNBC
• Treasury Buyers Get 5% Long Bond for First Time Since 2007 – Bloomberg
• Republicans Skeptical on Funding Security for Ballroom While White House Amps Up Pressure – Washington Post
• Ballroom Security Can't Be Privately Funded, Mullin Tells GOP Lawmakers – Politico
• Democrat Neguse Presses Burgum on Reflecting Pool, $13M 'No-Bid' Contract – The Hill
• House Eyes Summer for Another Party-Line Bill – Politico
• Kevin Warsh Confirmed as Fed Chair, Succeeding Jerome Powell – CNN
• Independent's Signature Forces House Vote on Ukraine Aid – Politico
• Senate Unanimously Advances Resolution Suspending Senators' Pay During Shutdown – The Hill
• Tariff Refunds Begin to Reach Businesses as Trump Lashes Out at Court – New York Times
• Trump Administration Freezes New Medicare Enrollments for Hospice and Home Health Agencies – Associated Press
• Justice Department Considers Settling Trump's $10 Billion IRS Leak Lawsuit – CNN
• RFK Jr.'s Chief HHS Spokesperson Resigns Over Flavored Vapes – The Hill
• Andreessen Horowitz Is Spending on Politics Like No Other – New York Times

Views and Analysis

• The US Inflation Problem Is Getting Worse – Neil Irwin, Axios
• America Is in for Yet Another Long Spell of Price Pain – Elisabeth Buchwald, CNN
• Why Republicans Can't Get Traction on Affordability Legislation – Jordain Carney and Meredith Lee Hill, Politico
• Why Warsh's Democrat Problem Could Come Back to Bite Him – Jasper Goodman and Sam Sutton, Politico
• The Long Bond Is Close to Meaningless – Robert Burgess, Bloomberg
• The Iran War Worsens America's Democratic Erosion – New York Times Editorial Board
• Younger Democrats Challenge Blue-State 'Gerontocracy' – David Weigel, Semafor
• Kash Patel and the Trump Administration's Mockery of Congressional Hearings – Aaron Blake, CNN
• At Least Kash Patel Is Not Leading the Fed – Jessica Karl, Bloomberg
• FDA Chief's Resignation Widens a Leadership Gap at the Nation's Health Department – Ali Swenson, Matthew Perrone and Mike Stobbe, Associated Press
• A Desperately Needed Reset at the FDA – Washington Post Editorial Board
• My Son Never Turned 7. Because of Choices in Washington, Others Won't Either – Zain Habboo, New York Times