Prices of Imports from China Fell Again in April

The prices of Chinese goods imported to the U.S. fell in April by 0.1 percent after holding steady in March. Prices are down 1.1 percent over the past twelve months.

Import prices reported by the Labor Department do not include tariffs or other taxes. That means that even if importers were passing tariffs on to consumers, import prices would not necessarily rise. But falling prices reduce any impact tariffs might have on U.S. consumers.

Prices of imports from China have fallen in five out of the seven months since the U.S. imposed a 10 percent tariff on $200 billion of Chinese goods. Prices were flat in December and March.

Critics have lambasted President Donald Trump for claiming that China pays the tariffs on its imports. They point out, correctly, that American importers directly pay the tariffs. Often, however, the critics incorrectly insist that the costs of those tariffs must be fully passed on to American consumers in the form of higher prices. This leads them to claim that American consumers pay for the tariffs on Chinese goods, a claim that flies in the face of evidence that consumer prices have not been rising.

But the decline in prices of goods imported from China supports Trump’s contention. Higher tariffs could be encouraging Chinese suppliers to absorb some of the cost of the tariffs by lowering prices. As well, the 6 percent decline in China’s currency over the past 12-months likely weighed on import prices, which are measured in dollars. Both imply that at least some of the economic cost of tariffs is being borne by China.

Prices of imports from Asia not including China rose 0.2 percent, the third consecutive monthly rise. This appears to confirm the anecdotal evidence that U.S. importers are buying products from other Asian nations instead of China in an effort to avoid tariffs. Compared with a year ago, however, prices of imports from non-China Asia are down 0.6 percent.

It was not just Chinese goods that fell in price in April. Excluding oil, import prices of goods overall fell 0.6 percent in April, the Labor Department said Tuesday.

Prices for capital goods declined 0.4 percent. Prices for consumer goods fell 0.3 percent in April. Autos and parts fell 0.1 percent.

Prices for consumer durable goods bear special attention because they have been a focus of reports claiming that China tariffs and metals tariffs would increase consumer prices. Durable goods import prices fell 0.4 percent in April and are down 1.9 percent from 12 months ago. That indicates that consumer prices are unlikely to accelerate despite tariffs.

The decline in prices suggests that inflationary pressures in the U.S. economy are very low and likely declining. This could lead the Federal Reserve to rethink its stance that low inflation recorded earlier this year was only “transitory.” Inflation has been running well below the Fed’s 2 percent target this year.

Prices for exports to China rose 0.6 percent in April, after increasing 0.5 percent in March. Over the past year, however, the prices of exports to China are down 2.7 percent.

Prices for U.S. exports overall advanced 0.2 percent in April, after increasing 0.6 percent in March and 0.7 percent in February.