🇺🇸 US Import Prices and Tariffs: What 2025 Tells Us About Trade Inflation

Context: Tariffs and the Price Channel

When governments impose tariffs, one of the key questions is: How much do import prices actually rise?
In theory, tariffs make imports costlier, but exchange-rate movements, supplier pricing, and corporate margins often absorb part of the shock.

The IMF’s analysis of US import prices excluding fuels compares two major tariff episodes:

• 2018 episode (blue line): Tariffs during the US–China trade tensions.

• 2025 episode (red line): New trade restrictions and supply-chain restructuring under the 2025 global tariff wave.

Figure 1.8 (2) — US Import Prices (Excluding Fuels)

Observation:

• Both episodes show limited movement in import prices (index near 100).

• In 2018, prices rose slightly after tariffs were imposed, but fell back within a year.

• In 2025, despite higher tariffs, import prices remained flat — reflecting stronger dollar appreciation and shifts toward alternative suppliers.

Tariffs in 2025 appear to have had smaller pass-through effects on import prices compared to 2018, suggesting firms have become more adept at diversifying supply chains and absorbing costs.

Why Prices Stayed Stable

Unlike 2018, global markets in 2025 are better positioned to absorb tariff shocks through structural flexibility rather than price inflation.

Implications for Global Trade and Emerging Economies

• Reduced Pass-Through: Advanced economies are now less inflation-sensitive to tariff shocks.

• Emerging Market Exposure: Developing economies like Kenya still feel indirect effects through imported goods (machinery, electronics).

• Trade Re-routing: The redirection of US import demand creates new export opportunities for Asia, Africa, and Latin America.

Tariffs alone don’t always cause visible inflation — their impact depends on currency strength, trade substitution, and supply resilience.

Lessons for Kenya and Africa

• Kenya can capitalize on supply-chain diversification by positioning itself as a value-added exporter within the AfCFTA framework.

• Building regional manufacturing clusters in electronics, textiles, and logistics could attract trade re-routing from Asia.

• Maintaining exchange-rate stability remains essential to shield against imported inflation.

For DatalytIQs Academy Learners

Recreate this analysis by:

• Using Matplotlib to plot 2018 vs 2025 tariff episode indices.

• Simulating the effect of a 5 % tariff increase on Kenya’s imported goods using exchange-rate elasticities.

• Calculating pass-through coefficients to estimate how much global price shocks translate into domestic inflation.

Data and Acknowledgment

Source: IMF World Economic Outlook (October 2025) – Figure 1.8 (2) “US Import Prices Excluding Fuels.”
Acknowledgment: IMF staff calculations using Bureau of Labor Statistics (BLS) import price indices.
Author: Collins Odhiambo Owino, DatalytIQs Academy