Brief Relief: Import Costs Drop, But Trump’s Tariff Surge May Trigger Price Spiral

U.S. import prices unexpectedly slipped in March, offering fresh signs of easing inflation. However, analysts warn that President Donald Trump ’s sweeping new tariffs could soon reverse the trend, potentially igniting stagflation fears and market turbulence.

Import Prices Fall 
Import prices fell 0.1% in March, the first monthly decline since September, according to the U.S. Bureau of Labor Statistics. The drop was largely driven by lower energy costs, especially in imported fuels, which declined by 2.3%. On an annual basis, import prices were up 0.9%, easing from a 1.6% rise in February. Excluding volatile fuel and food categories, core import prices rose 0.1%, matching February’s gain. Analysts had expected prices to hold steady, but the softer reading suggests a cooling trend—at least for now.

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Trump’s Tariffs

Economists caution that President Trump’s newly imposed 25% import tariffs, part of his "America First" industrial revival agenda, may soon send prices soaring. “There is likely to be a very painful and costly transition as Trump 2.0 tries to turn back the clock and go back to making things in America,” said FWDBONDS’ chief economist Christopher Rupkey.
Markets fear the U.S. may be headed toward stagflation—where inflation rises despite slowing growth.

Dollar Slips, Fuel Prices Drop

A weakened dollar, down 2.6% year-to-date, is making imports more expensive. While imported food costs remained nearly flat, capital goods rose 0.3%, and prices for imported consumer goods (excluding autos) dropped 0.2%.
Prices for imports from China declined 0.2% in March and 0.9% year-on-year, signaling the deepening effect of the ongoing trade war. However, Japanese imports were costlier by 0.5% and EU prices held steady.

Fed Faces Tough Choices

With market pressure mounting, the Federal Reserve is expected to resume rate cuts in June, possibly trimming up to 100 basis points by year-end. Minutes from the Fed’s March meeting revealed growing concern over inflation risks paired with slowing growth. As trade tensions escalate and Trump's tariffs ripple through global supply chains, economists warn that the brief relief from inflation may be short-lived.