Inflation receded in February on the back of easing price pressures for consumer staples like gasoline, groceries and housing, amid worries that President Donald Trump’s tariff policies could stall progress.

The consumer price index rose 2.8% for the 12 months ended in February, the U.S. Bureau of Labor Statistics reported Wednesday. That’s down from 3% last month.

The deceleration is encouraging after fears in recent months that inflation had become entrenched and wasn’t falling back to target.

“Progress is bumpy,” said Michael Pugliese, senior economist at Wells Fargo Economics. “It’s not a linear path down. There are still risks, but there are no signs of a reacceleration with the data in hand.”

The consumer price index measures how quickly prices rise or fall for a basket of goods and services, from haircuts to coffee, clothing and concert tickets.

CPI inflation has declined significantly from its pandemic-era high of 9.1% in June 2022. However, it remains above the Federal Reserve’s target. The central bank aims for a 2% annual rate over the long term.

“Excluding any major policy changes, I’d expect [inflation] to continue gradually slowing,” Pugliese said. “Of course, the big question on everyone’s mind is, what are the big policy changes that will happen over the course of this year?”

Trump imposed a fresh round of tariffs on foreign steel and aluminum imports on Wednesday, triggering retaliatory tariffs from Europe on about $28 billion of U.S. goods starting in April. The Trump tariffs follow on others he’s already imposed on Canada, China and Mexico, the three largest trading partners of the U.S.

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Tariffs, a tax paid by U.S. importers, add costs for businesses that ultimately get passed to consumers, economists said. Steel tariffs, for example, could make steel-intensive items like cars, homes and machinery more expensive, they said.

The president has proposed additional tariffs, though it’s unclear if they’ll take effect or for how long.

An outbreak of avian flu — which is highly contagious and lethal among birds — has killed millions of egg-laying chickens and reduced egg supply, economists said. The U.S. Justice Department also opened an investigation into potential antitrust issues related to the surging price of eggs, according to news reports.

The price of instant coffee has also increased about 9% in the past year, according to CPI data. Weather patterns like droughts fueled by climate change have disrupted major coffee growers including Brazil, reducing supplies of coffee beans.

Overall, though, inflation for groceries is relatively low, at 1.9% in the past 12 months.

Gasoline inflation was also tame in February. Prices were down 1% from January to February, and down 3% in the past year, according to CPI data.

Shelter is the largest component of the CPI, and movements up and down can have a significant impact on overall inflation readings. Annual inflation for shelter was at 4.2% in February, the lowest since December 2021.

“Housing inflation is historically the ‘stickiest’ component of inflation, meaning it takes longer to buck price trends,” Gargi Chaudhuri, BlackRock’s chief investment and portfolio strategist for the Americas, wrote in an e-mailed note Wednesday. “The recent trend in housing prices keeps us optimistic on the future trajectory of inflation.”

BEIJING — China is willing to do more to address White House concerns about illicit fentanyl trade, but it will be “a different thing” if ongoing debate over the drug facilitates more U.S. tariffs on the world’s second largest economy, an official from the Chinese Ministry of Foreign Affairs told reporters Wednesday.

Washington should have “said a big thank you” to China on what it has done to restrict fentanyl trade in the U.S., the official said via an official English translation, claiming the White House did not appreciate the effort and instead raised duties on Chinese goods twice this year over the drug.

Since taking office in January, U.S. President Donald Trump has increased tariffs on Chinese goods by 20% on the basis of the country’s alleged role in the U.S. fentanyl crisis. The addictive drug, precursors to which are mostly produced in China and Mexico, has led to tens of thousands of overdose deaths each year in the U.S.

The White House did not immediately respond to a CNBC request for comment.

Earlier this month, the Chinese government published a white paper to publicize its efforts to curtail the production and export of fentanyl precursors over the last few years. The official did not respond directly to a question on whether China would stop its recent efforts to restrict such trade.

Under the Biden administration, the U.S. and China had said fentanyl was one of the few areas in which the two countries could cooperate. Both sides held dedicated talks in Beijing last year on the topic.

Trump indicated earlier this year that he could also use tariffs as a way to pressure China into forcing Beijing-based ByteDance to sell TikTok, which is running against an early April deadline to remain available in the U.S.

Trump had emphasized tariffs as a way to reduce the U.S. trade deficit with China during his first presidency. Just before the onset of the Covid-19 pandemic, the two sides reached a “Phase One” trade agreement requiring Beijing to increase its purchases of U.S. goods. U.S. data shows that the trade deficit with China narrowed to $295.4 billion in 2024, from $346.83 billion in 2016, just ahead of Trump’s first mandate.

But differences on trade have continued since the January start of the White House leader’s second mandate. The average effective U.S. tariff rate on Chinese goods is now set to hit 33%, up from around 13% before Trump began his latest term, according to estimates from Nomura’s Chief China Economist Ting Lu.

Beijing has responded to the latest U.S. tariffs with targeted duties on energy and agriculture products, while tightening restrictions on exports of critical minerals that the U.S. needs. China’s Ministry of Commerce has also added several U.S. companies, mostly in aerospace or defense, to lists that limit their ability to do business with China.

The Ministry of Foreign Affairs official said Wednesday that China’s countermeasures were “legitimate actions” to protect its own interests.

Allianz estimates the additional 20% U.S. tariffs on Chinese goods would hit China’s GDP growth by 0.6 percentage points this year and next. But the firm still expects the Chinese economy to grow by 4.6% this year and 4.2% in 2026, based on the assumption that stimulus can mitigate the tariff impact.

“I would tend to say the retaliation is not so strong, maybe leaving room for negotiations,” Francoise Huang, senior economist for Asia-Pacific and global trade at Allianz Trade, said in a CNBC interview last week.