May Import Prices Show No Change Amid Lower Fuel Costs, Tariff Headwinds

‘Businesses have for the most part managed to absorb the cost of the new trade taxes,’ RSM economists said.

Containers are being unloaded in the Port of Rotterdam in Rotterdam, Netherlands, on July 31, 2024. Mihut Savu/The Epoch Times

Prices of imports into the United States remained flat in May, led by a decline in energy costs, according to new data from the Bureau of Labor Statistics released on Tuesday.

Import prices came in at zero percent last month following a 0.1 percent jump in April. The consensus estimate had signaled a 0.2 percent drop.

This was driven by a 4 percent decrease in import fuel prices, the largest monthly drop since September 2024, attributed to lower costs for natural gas and petroleum.

Excluding fuel, prices for all imports rose 0.3 percent, down from the 0.4 percent in the previous month. Higher prices for a broad array of non-fuel industrial, capital, and consumer goods offset lower costs for food and beverages, the U.S. government noted.

In May, export prices plunged 0.9 percent, the largest single-month decrease since October 2023.

Prices for agricultural shipments edged up 0.2 percent, down from the 0.4 percent increase in April. Non-agricultural export prices fell by 1 percent.

On a 12-month basis, import and export prices are up 0.2 percent and 1.7 percent, respectively.

Comparable to trade prices in previous months, the latest figures suggest that inflation continues to slow, even after President Donald Trump implemented his sweeping tariff agenda.

Wholesale prices were little changed in May, rising by a smaller-than-expected rate of 0.1 percent. Market watchers monitor the producer price index because it can serve as an indicator of consumer inflation, as it is located early in the supply chain.

Monitoring Tariff-Induced Inflation

After accelerating their purchases of foreign goods ahead of U.S. levies, companies slammed the brakes on imports.

Imports plunged more than 16 percent in April to a six-month low of $351 billion. Exports advanced 3 percent to a record high of $289.4 billion. These developments cut the trade deficit in half to $61.6 billion, the lowest since August 2023.

“Even as some goods showed early signs of tariff-induced inflation, businesses have for the most part managed to absorb the cost of the new trade taxes,” RSM economists said in a note.

“Many firms began stockpiling inventory as early as last November, shortly after the U.S. election.”

However, once retail inventories are depleted, will companies resume their purchases from abroad, which would be subject to higher tariffs?

This is what market observers are monitoring, with analysts expecting pressure points to begin unfolding in the coming months.

“If past seasonal patterns hold, the pressure point will arrive this summer and last through October, when retailers typically replenish inventories in preparation for back-to-school and holiday shopping,” the RSM strategists note.

People shop at a grocery store in New York City on March 12, 2025. Samira Bouaou/The Epoch Times

Retailers would then be forced to make a decision: absorb higher costs at the expense of their profits or pass the costs on to their customers.

A New York Federal Reserve report found that manufacturing and service firms have responded to higher tariff-related costs by raising prices. Additionally, a recent Atlanta Fed inflation expectations survey discovered that businesses plan to pass about half of the tariff-driven costs on to consumers.

The Federal Reserve’s latest Beige Book—a summary of economic conditions across the central bank’s 12 districts—suggests firms are engaging in a balancing act.

“All District reports indicated that higher tariff rates were putting upward pressure on costs and prices,” the report stated. “However, contacts’ responses to these higher costs varied, including increasing prices on affected items, increasing prices on all items, reducing profit margins, and adding temporary fees or surcharges.”

Several major retailers have weighed in on tariffs and their impact on consumer prices.

Walmart announced during last month’s earnings call that despite strong first-quarter earnings, it would have to raise prices on items amid higher tariff costs. Home Depot, however, left its full-year sales forecast unchanged and confirmed that it does not plan to raise prices due to higher import duties.

Shrinking consumer demand may force businesses to hold off on price hikes, particularly after the disappointing retail sales data.

In May, retail sales declined for the second consecutive month, dropping at a worse-than-expected rate of 0.9 percent.

“The outlook for consumer spending is cloudy,” Bill Adams, chief economist for Comerica Bank, said in a note emailed to The Epoch Times.

“On the one hand, consumers might feel better in June with fewer headlines about tariffs and the stock market stable. On the other hand, the Israel–Iran war could make them feel more downbeat.”

Two key inflation forecasting tools suggest that prices could gradually increase.

The Cleveland Fed’s Inflation Nowcasting model projects the headline annual inflation rate will tick up to 2.6 percent in next month’s consumer price index from 2.4 percent.

Truflation, a running real-time estimate relying on a treasure trove of data points, suggests inflation is still hovering around 2 percent.