Reuters
The numbers: The cost of imported goods fell in May, reflecting a decline in the prices of most foreign-made goods including those coming from China that have been hit with U.S. tariffs.
The import price index dropped 0.3% last month, the government said Thursday. Import prices fell by the same amount even if fuel is excluded.
Import prices have dropped 1.5% in the past 12 months, matching January for the largest decline since the fall of 2016. By contrast, import prices were rising at a 4.5% annual clip a year earlier.
The falling cost of imports is helping to suppress price pressures in the U.S. The rate of inflation is hovering around 2% and shows little sign of budging.
Read: Why the U.S.-China trade deficit is so huge: Here’s all the stuff America imports
What happened: The cost of fuel imports sank 1% last month, partly reversing a big increase in the first four months of the year when oil prices surged. Oil prices have since backed off.
It wasn’t just oil and gas, however. The cost of foods, industrial supplies and most other foreign goods also declined in May.
Similarly, the price of U.S. exports are declining. Export prices dipped in May and have fallen almost 1% in the past year.
Big picture: Part of the decline in import and export prices are the result of a slower global economy that’s crimped demand. A strong dollar DXY, +0.01% has also hurt U.S. exporters.
The ongoing trade battle between the U.S. and China has taken a toll, too. The import price index does not include the cost of tariffs, but falling prices of Chinese imports may be a sign that Chinese suppliers have cut prices to retain market share.
The cost of Chinese imports — importantly, excluding tariffs — have dropped 1.4% in the past year.
Many factors are at work, however, and it’s hard to separate out the effect of tariffs. The Chinese currency CNYUSD, -0.0679% has declined in value relative to the dollar, for one thing, and that could also be making Chinese imports less expensive.
The prices American exporters fetch for goods sold in China, meanwhile, have declined even more steeply. They sank 1.4% in May and are down 4.3% in the past year.
American farmers have been especially hard hit, especially those that produce soybeans. Agricultural export prices have slumped 5.3% in the past 12 months, the largest drop in three years.
Read: Trump takes a page out of early American history with steep tariffs on Chinese goods
Also Read: The price spikes for appliances after Trump’s tariffs are fading away
Market reaction: The Dow Jones Industrial Average DJIA, -0.17% and S&P 500 SPX, -0.20% were set to open mildly higher in Thursday trades amid reports of a possible attack on oil tankers in the Mideast that depressed futures prices overnight.
The 10-year Treasury yield TMUBMUSD10Y, -0.08% was little changed at 2.12%.
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