Inflation cooled unexpectedly sharply in March, a welcome development given the uncertainties surrounding President Donald Trump’s global tariffs, which are widely expected to stoke price pressures while also denting growth.

The consumer price index climbed 2.4% last month from a year earlier, a far slower pace than February’s 2.8% increase and the lowest annual rate since September. Over the course of the month, prices fell 0.1%.

A gauge tracking underlying inflation, which strips out volatile food and energy items, slipped to 2.8% in March, following a 0.1% monthly increase. Overall, that is the slowest annual pace for “core” inflation since 2021.

The report, released by the Bureau of Labor Statistics on Thursday, significantly undershot economists’ expectations, prompting Trump and his advisers to seize on the data as a sign that the president’s policies were working.

It “wasn’t just good, it was really great,” Stephen Miran, the chair of the White House Council of Economic Advisers, said of the inflation report. But economists warn that the positive news is unlikely to last with costly tariffs now in effect against China and other trading partners.

“We don’t see tariffs as a one-time price shock. We see them as having significant second-round effects,” said James Egelhof, chief U.S. economist at BNP Paribas. “We expect that tariffs will first impact goods prices and then ultimately move through wages as the labor market remains fairly tight. That feeds back and affects other goods prices and services as well and creates a cycle in inflation.”

In recent days, the president’s tariff plans have changed drastically, culminating in the administration on Wednesday announcing a 90-day pause on punishing levies put in place April 2.

Trump’s decision to pause came as global financial markets started to flash warning signs about investors’ appetite for U.S. assets. Goods coming into the country from most other countries will now face a 10% tariff, while Chinese imports will have a 125% charge, after Beijing’s decision to retaliate against U.S. products.Trump’s pivot significantly eased worries about the extent of the economic damage stemming from his administration’s trade policies. But the levies are significant enough to have a notable impact on growth and inflation, economists say.

Consumers are at risk of bearing the brunt of the costs from tariffs, which are a tax on imports. Businesses are widely expected to try to pass along their higher expenses in the from of price increases or risk their profit margins getting squeezed significantly.

In an interview with CNBC on Thursday, Andy Jassy, Amazon’s CEO, said he expected most of the third-party sellers on the giant e-commerce platform to do so. “I understand why, I mean, depending on which country you’re in, you don’t have 50% extra margin that you can play with,” he said. “I think they’ll try and pass the cost on.”

Andrew Hollenhorst, chief U.S. economist at Citigroup, said this dynamic could start to show up in the data in the coming months as businesses adjust.

“These tariffs are so large, so broad and so well-telegraphed that that might give retailers more confidence that everyone’s going to be raising their prices,” he said.

Economists worry that consumers will end up rejecting these price increases and instead significantly curtail their spending. That could weigh further on growth and even risk the economy tipping into a recession if businesses eventually are forced to fire workers as demand falls.

March’s softer inflation data stemmed from a sharp drop in energy prices as well as a decline in transportation-related categories like airfares, auto insurance and used cars. Grocery prices rose 0.5% for the month.