US Import Prices Muted, But Tariffs Loom Over Inflation

• 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 Labour Department on Tuesday, April 15, 2025, 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 Labour Department's Bureau of Labour 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.
• 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.
• That said, 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. Furthermore, the 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.

(Source: Reuters)