Prices for goods and services moved up less than expected in February, providing some relief as consumers and businesses worry about the looming impact tariffs might have on inflation, the Bureau of Labor Statistics reported Wednesday.

The consumer price index, a wide-ranging measure of costs across the U.S. economy, ticked up a seasonally adjusted 0.2% for the month, putting the annual inflation rate at 2.8%, according to the Labor Department agency. The all-item CPI had increased 0.5% in January.

Excluding food and energy prices, the core CPI also rose 0.2% on the month and was at 3.1% on a 12-month basis. The core CPI had climbed 0.4% in January.

Economists surveyed by Dow Jones had been looking for 0.3% increases on both headline and core, with respective annual rates of 2.9% and 3.2%, meaning that all of the rates were 0.1 percentage point less than expected.

Stock market futures added to gains after the release while Treasury yields rose. Markets have been highly volatile as the Dow Jones Industrial Average has slipped 6% over the past month.

“A lot of this inflation data does not incorporate what is to come and what already has happened for tariffs,” said Kevin Gordon, senor investment strategist at Charles Schwab. “The vagaries and uncertainties associated with policy are still a much stronger force in the market than anything CPI-related or in terms of one data point.”

Shelter costs moved up 0.3%, less than in January but still responsible for about half the monthly increase in the CPI, the BLS said. The category makes up more than one-third of the total weighting in the CPI, with particular focus on a measure in what homeowners estimate they could get in rent for their properties, which also increased 0.3%.

Food and energy indexes both increased 0.2%. Used vehicle prices jumped 0.9% and apparel rose 0.6%. Within food, egg prices soared another 10.4%, taking the 12-month increase to 58.8% and pushing a broader measure that also includes meat, poultry and fish up 7.7% on the year. Beef prices also climbed 2.4% in February.

Motor vehicle insurance posted a 0.3% increase on the month and was up 11.1% annually. However, airline fares slipped 4% in February and were down 0.7% from a year ago.

Inflation-adjusted average hourly earnings increased 0.1% for the month and were up 1.2% from a year ago, the BLS said in a separate release.

The report comes at a potentially critical juncture for the U.S. economy and financial markets, which have been shaken lately as President Donald Trump escalates a trade war and concerns rise of a growth scare.

In the latest developments, Trump’s 25% duties on steel and aluminum took effect Wednesday, prompting retaliatory measures from the European Union. Trump also has slapped 20% levies on goods from China.

Federal Reserve officials are watching the developments closely. Central bank policymakers generally consider tariffs to have modest impacts on inflation and often are viewed as one-off measures that don’t have lasting impact on longer-term gauges.

However, a broader trade war could change that if the pace of increases becomes more ingrained in the economy. Markets currently expect the Fed to resume cutting interest rates in June, with a total of 0.75 percentage point in reductions by the end of 2025.

“The February CPI release showed further signs of progress on underlying inflation, with the pace of price increases moderating after January’s strong release,” said Kay Haigh, global co-head of fixed income and liquidity solutions at Goldman Sachs Asset Management. “While the Fed is still likely to remain on hold at this month’s meeting, the combination of easing inflationary pressures and rising downside risks to growth suggest that the Fed is moving closer to continuing its easing cycle.”

The Fed meets next week and is widely expected to hold its key borrowing rate in a target range between 4.25%-4.5%.

Economic growth is trending negative in the first quarter, according to the Atlanta Fed’s GDPNow tracker of incoming data. The measure has pegged Q1 growth at a 2.4% decline, which would be the first negative growth quarter in three years.

Caleb Ragland, a soybean farmer in Magnolia, Ky., voted for President Donald Trump in 2016, 2020 and 2024. Now, however, he has to navigate a tariff minefield at a time when the sector is already facing major headwinds.

Ragland works with his wife and three sons and has deep roots in the community. His family has been farming on the land for more than two centuries. But over the past few years, he has seen a double-digit percentage decline in crop prices while production costs rise. Soybean futures have gone down more than 40% over the past three years along with corn futures.

As pressures mount in the industry as a result of tariffs imposed by the second Trump administration — as well as retaliatory levies from other countries — he’s worried about the longevity of his business.

“My sons potentially could be the 10th generation if they’re able to farm,” Ragland, who is also the president of the American Soybean Association, told CNBC. “And when you have policies that are completely out of our control – that they manipulate our prices 20%, 30%, and on the flip side, our costs go up – we won’t be able to stay in business.”

This isn’t the first time farmers have had to deal with new tariffs. Back in Trump’s first term, the trade war with China in 2018 — a time when Ragland said the agricultural economy was “in a much better place than it is right now” — cost the U.S. agriculture industry more than $27 billion, and soybeans made up virtually 71% of annualized losses.

That trade war has caused lasting damage. To this day, the U.S. has yet to fully recover its loss in market share of soybean exports to China, the world’s number one buyer of the commodity, according to the ASA.

“Tariffs break trust,” Ragland said. “It’s a lot harder to find new customers than it is to retain ones that you already have.”

The White House last week imposed a 25% tariff on goods from Canada and Mexico alongside an additional 10% duty on Chinese imports.

While Trump soon reversed course by granting a one-month tariff delay for automakers Wednesday, then pausing tariffs a day later for some Canadian and Mexican goods until April 2, he said in an interview that aired Sunday on Fox News that tariffs “could go up” over time.

Tariffs on China were not included in these exemptions. China retaliated with levies of its own, which mainly target U.S. agricultural goods. Specifically, U.S. soybeans are now subject to an additional 10% tariff, while corn gets hit with an extra 15% charge.

“We’re already at the point that we’re unprofitable,” Ragland said. “Why on earth are we trying to add insult to injury for the ag sector by basically adding a tax?”

Ragland pointed out that he “appreciates the president’s ability to negotiate” and wants Trump to be successful for the sake of the country. However, he emphasized that those in the industry, especially soybean producers, don’t have any “elasticity in our ability to weather a trade war that takes away from our bottom line.”

“Folks are upset,” Ragland said about sentiment from other farmers, stressing that they all need relief through deals that reduce barriers to trade and a new five-year comprehensive farm bill – legislation that provides producers with key commodity support programs, among others. “You’re talking about people’s livelihoods,” he remarked.

Agriculture Secretary Brooke Rollins said last week that the Trump administration was reportedly weighing exemptions on some agricultural products from tariffs on Canada and Mexico. Trump’s adjusted measures Thursday included a reduced 10% tariff on potash, which is used for fertilizer.

More than 80% of American farmers’ potash needs are supplied by Canada, said Ken Seitz of Nutrien – a crop inputs and services provider based in Canada – during the BMO Global Metals, Mining & Critical Minerals Conference last month.

“As we look at the implications of tariffs for Nutrien, of course the biggest discussion is around potash, and that’s because in a market that’s kind of 10 million to 11 million tons in any given year, we ourselves supply about 40% of that market,” the company’s chief executive underscored during the conference. “We believe that the cost of tariffs will be passed on to the U.S. farmer.”

Even in the runup to the implementation of Trump’s tariffs, American farmers were sounding the alarm. Despite the latest Purdue University/CME Group Ag Economy Barometer reading showing that farmer sentiment overall improved in February, 44% of survey respondents disclosed that month that trade policy will be most important to their farms in the next five years.

“Usually when you ask a policy question, by far and away the most important policy is crop insurance,” Michael Langemeier, agricultural economist at Purdue University, said. “Crop insurance is right up there with apple pie and baseball. It’s a program that’s very well liked, because it provides a very effective safety net.”

“The fact that crop insurance was a distant second to trade policy speaks volumes,” he also said.

The February survey also showed that almost 50% of farmers said that they think a trade war leading to a significant decrease in U.S. agricultural exports is “likely” or “very likely.” Langemeier estimated that between mid-February and early March, there was a 33% per acre drop in net return for soybeans and corn related to the tariffs. That’s on top of the fact that 2025 was “not ending up to be an extremely profitable year before this,” he revealed.

The economist thinks there may be a bit of a downward adjustment in overall farmer sentiment in the near term. Nevertheless, a constructive consequence of the tariffs could be that they speed up the signing of a new farm bill, he said.

“Well, how in the world can you come up with the amounts for the trade payments if you don’t even know what the amounts for the farm bill are going to be,” Langemeier asserted. He expects that the new farm bill signing will take place at some point this year.

Looking to the upcoming spring season, Bank of America analyst Steve Byrne wrote in a Feb. 25 note that tariffs could lead to “more conservative purchases of crop inputs.” That would mean a risk of lower fertilizer purchases, which could affect not only Nutrien but others like Mosaic and CF Industries, the analyst noted.

Shares of those companies, as well as other farming-related stocks like AGCO and Deere, all sold off on March 3 and March 4 on the heels of Trump’s tariff announcement.

“I think we’ve seen the ag stock sell-off just because of general concerns that the farmer is going to not be as profitable this year,” Morningstar’s Seth Goldstein said in an interview with CNBC.

Over the past month, Mosaic has slid almost 8%, while CF Industries has fallen more than 8%. Nutrien has also lost more than 1%. AGCO and Deere have fared better in that time, gaining around 2% and about 1%, respectively.

When it comes to how this trade war will affect American farmers in the long term, Goldstein doesn’t see that meaningful of an impact. He anticipates that global trade flows will shift and cancel each other out over the next two to three years or so.

“While there may be a near-term impact this year of soybeans sitting in warehouses without really available buyers, I think eventually we would see other countries then start to buy more U.S. soybeans,” the equity strategist said. “Maybe China buys more soybeans from Brazil, but maybe a place like Europe then buys more soybeans from the U.S., and we get … not that much difference.”

As it stands, Brazil is forecast to be the world’s largest soybean producer ahead of the U.S. for the 2024/2025 marketing year, accounting for 40% of global production in the period, per the Department of Agriculture. For corn, on the other hand, the U.S. is forecast to be in the top spot, making up 31% of global production in the marketing year.

Others on Wall Street believe that tariffs will be more consequential on trade dynamics, however.

Kristen Owen, an analyst at Oppenheimer, predicts that the duties will likely solidify Brazil becoming the primary global producer for both corn and soy, whereas the U.S. will become a sort of incremental supplier to the world.

“Brazil specifically has more capacity to grow their acreage, more capacity to grow to increase their share of the global grain trade,” she said to CNBC. “Tariffs and some of the other decisions that the administration is making just accelerate some of that.”