US import prices muted, but tariffs loom over inflation

Yahoo

06-05-2025

WASHINGTON − U.S. import prices unexpectedly fell in March, pulled down by decreasing costs for energy products, the latest indication that inflation was subsiding before President Donald Trump's sweeping tariffs came into effect.
The report from the Labor Department on Tuesday added to March's benign consumer and producer prices data. Economists expect tame readings in March in the key inflation measures tracked by the Federal Reserve for its 2% target.
"There is likely to be a very painful and costly transition for the U.S. economy as Trump 2.0 tries to turn back the clock and go back to making things in America," said Christopher Rupkey, chief economist at FWDBONDS. "Import prices are not adding much to inflation for now, but the future outlook remains very much in doubt and not in a good way."
Import prices dipped 0.1% last month, the first decline since September, after a downwardly revised 0.2% gain in February, the Labor Department's Bureau of Labor Statistics said. Economists polled by Reuters had forecast import prices, which exclude tariffs and are measured close to the beginning of the month, would be unchanged following a previously reported 0.4% increase in February.
In the 12 months through March, import prices advanced 0.9% after increasing 1.6% the prior month.
The import price data cemented economists' expectations that the Personal Consumption Expenditures (PCE) price index excluding food and energy edged up 0.1% in March after shooting up 0.4% in February. That would slow the annual increase in so-called core PCE inflation to 2.6% from 2.8% in February.
February was the third biggest for imports to the U.S., according to Census trade data. Shipping containers are organized at the Houston Port Authority on February 10, 2025 in Houston, Texas.
More: Economy will likely slow to near-standstill or recession despite Trump tariff pause, experts say
The White House's import duties campaign has triggered a damaging trade war with China and plunged financial markets into turmoil. Investors are fearful of high inflation and tepid growth or even a recession.
Minutes of the Federal Reserve's March 18-19 meeting published last week showed policymakers were nearly unanimous that the economy faced risks of simultaneously higher inflation and slower growth, commonly referred to as stagflation.
Inflation and growth fears were amplified by a separate survey from the New York Fed on Tuesday showing businesses in New York state in April expected conditions to deteriorate over the next six months.
A measure of future general business conditions slumped to its second-lowest reading in the survey's more than 20-year history.
Businesses also noted worsening supply availability. The survey's measures of prices paid for inputs and received for goods sold jumped to more than two-year highs.