Prices of Foreign Goods Plunge for U.S. Consumers

International Container Cargo ship in operation.
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So much for the idea that the trade war was going to push up prices for U.S. consumers.

The cost of goods imported into the U.S. plunged in October, the government said Friday. The import price index sank 0.5 percent, reflecting declines in the price of oil, food, and consumer electronics. Compared with a year ago, import prices are down 3 percent.

Economists had expected a more modest decline of two-tenths of a percentage point for the month and a year-over-year decline of 2.1 percent.

The government measures import prices before tariffs are applied. But tariffs can show up in the data if foreign manufacturers drop the prices of goods to stay competitive in the U.S. market despite tariffs.

Prices of goods imported from China are down 1.6 percent from a year ago. Prices from goods elsewhere in Asia are down 2.5 percent, an indication that moving supply chains out of China to avoid tariffs is not forcing U.S. companies to pay more for goods.

The import price data released Friday is the third piece of data showing that inflationary pressures in the economy are very low and even declining. That upends the widespread predictions by many critics of the Trump administration’s trade policy that the U.S. consumer would be squeezed by tariffs.

The Federal Reserve notably predicted that the latest round of China tariffs would cost on average around $831 per household in the U.S. That forecast now looks very far off-base and will likely have to be revised sharply downward given the fall in prices, especially those in imported goods.

The fall in import prices means Americans are paying less for everything from wine and cheese to home electronics to appliances. The price of imported durable goods, those meant to last three years or more, is down 1.3 percent from a year ago. On Tuesday, government data showed that prices for major appliances–both imported and homegrown–are down 3.3 percent compared with a year ago.

The U.S. may be importing deflation from sluggish economies around the globe. As demand for goods falls due to slow growth abroad, prices for U.S. consumers can fall. That creates downward pressure on domestically produced goods that compete with imports.

The prices of exports fell as well in October, indicating lower demand abroad.

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