US Import Prices and Tariffs: Inflation, Capital Goods and Global Trade

Summary: the main conclusions

• Import-cost pressure extends beyond energy. Nonfuel import prices rose 5.5% over the year, while imported capital goods rose 7.3%.
• Tariffs are an additional cost channel. BLS import-price indexes exclude import duties; they do not directly measure the full cost of bringing tariffed goods into the United States.
• China requires a separate assessment. Its supplier-price changes, US tariff charges, retaliation and supply-chain adjustments affect businesses through different channels.
• Trade-price ratios are not a scorecard for a trade war. Better terms of trade can coexist with higher import costs, weaker sales volumes or pressure on corporate margins.

Figures are from the BLS August import-price table; the treatment of duties is explained in the BLS methodology FAQs.

1. Import inflation is broader than fuel

Nonfuel import prices increased 0.8% in August. BLS reports that their annual increase was the largest since May 2022. That makes it inappropriate to assume imported goods are consistently providing a disinflationary offset. It also shows why the historical claim that imports never create inflation pressure is too broad. Source: BLS August 2026 release.

The broad industrial-supplies category includes energy and should not be described simply as “metals.” Its nonfuel subset helps isolate pressure beyond energy. These are not seasonally adjusted figures, published by BLS using the BEA end-use classification. Source: BLS Table 1.

ATN interpretation: higher prices across production inputs create a wider business challenge than a rise confined to petrol or a handful of consumer products. The effect depends on which inputs a company uses, its contracts and how much pricing power it has.

2. How tariffs add to business costs

BLS explicitly excludes duties from its import-price indexes. Consequently, a rise in these indexes is not the measured tariff bill. Supplier prices can change with commodity markets, exchange rates, demand and commercial negotiations; tariff policy can also influence those negotiations indirectly. Source: BLS FAQs on import duties.

Consider a simplified example, using hypothetical rates rather than any current country tariff:

The supplier price rose 5.5%, but the combined cost rose 16.05%. This illustration assumes the tariff applies to the stated supplier value and makes no allowance for exemptions, discounts or other charges.

A tariff already present in both comparison periods is different: an unchanged rate does not automatically add that many percentage points to each subsequent year’s inflation. A new tariff can raise the price level during the adjustment. Persistent inflation requires further increases, continuing cost propagation or other sources of price growth.

Businesses may respond by raising selling prices, accepting lower margins, changing suppliers or delaying purchases. Consumers therefore need not face the entire increase immediately. Conversely, a delay in retail price increases does not establish that businesses avoided the cost.

3. Why capital goods deserve particular attention

Capital equipment helps businesses expand capacity, automate tasks and improve productivity. When equipment becomes more expensive, a fixed investment budget buys less capacity. A project that previously offered an acceptable return can become harder to justify.

This creates a potential tension within industrial policy. Tariffs can encourage companies to manufacture domestically, but a new domestic factory may still need imported machinery and components. Raising their cost can make the initial investment more expensive.

The eventual result depends on whether domestic alternatives exist, how quickly they can scale, and whether reliability or security benefits justify a higher purchase price. Targeted exclusions for equipment and inputs can therefore matter as much to investment decisions as the headline tariff rate.

Higher equipment prices do not prove investment will fall: strong demand, automation savings or policy incentives may outweigh the additional expense. They do, however, raise the hurdle that an investment must clear.

4. Terms of trade: what the ratio actually tells us

The BLS terms-of-trade index is the export-price index divided by the corresponding import-price index, multiplied by 100. An increase means export prices rose relative to import prices. A decline means the opposite. Source: BLS Table 9.

In a simplified example, if export prices rise 10% while import prices rise 5%, unchanged export quantities can finance more imports, other things equal. This is an improvement in terms of trade even though imports themselves have become more expensive.

Canada shows annual deterioration; the other listed partners show improvement on this measure. These are percentage changes, not differences in index points. Germany overlaps with the EU, and Mexico with Latin America, so the rows must not be added together. Source: BLS terms-of-trade table.

These ratios do not measure trade balances, export volumes, employment gains or tariff revenue. Nor does an index of 127.7 mean that a country is “27.7% more expensive” than another country. The index tracks change from a reference period, not comparable price levels across countries.

5. China: modest relative-price improvement, continuing cost pressure

Prices of US imports from China rose 3.0% over the year to August, while prices of US exports to China rose 4.4%. The US terms-of-trade index with China improved 1.3%. Sources: BLS import prices by origin, export prices by destination and terms of trade.

That does not establish that China is paying the US tariff bill. Import-price inflation from China was lower than the broad nonfuel increase, but the country and product baskets differ. Neither comparison identifies what Chinese supplier prices would have been without tariffs, or measures the duty-inclusive cost faced by US purchasers.

The China dispute also has an industrial-policy dimension. The Section 301 framework addresses concerns about technology transfer, intellectual property and innovation. Its product lists and exclusions make the policy more complex than a single tariff percentage applied uniformly to everything China exports. Source: USTR China Section 301 actions.

The economic distinction between targeted and broad tariffs matters. A targeted measure may support capacity in an industry considered strategically important. Wider tariffs can reach intermediate inputs and equipment used by American manufacturers, creating costs beyond the protected sector.

Import substitution also has several possible outcomes. Production may move to the United States, move to a third country, or remain dependent on Chinese upstream inputs despite a change in final assembly location. A smaller bilateral deficit alone cannot distinguish these outcomes or demonstrate an improvement in the overall US trade balance.

Retaliation affects the export side

China’s countermeasures can restrict market access for US exporters, even while US tariffs protect selected domestic producers. Reuters reported on September 18 that the two sides were discussing reducing or removing China’s 15% tariff on US LNG ahead of a planned leaders’ meeting. Those were negotiations, not a completed tariff reduction. Source: Reuters, September 18, 2026.

For businesses, a credible reduction in barriers on both sides could lower purchasing costs and improve export opportunities. Uncertain implementation dates or repeated changes can instead complicate contracts and investment plans.

6. What the earlier tariff experience shows

A US International Trade Commission study of 2018–2021 found that US importers bore nearly the full cost of the Section 232 and Section 301 tariffs examined. It also found increased production in protected industries alongside higher prices. Steel and aluminium tariffs reduced production in downstream industries that used those metals.

For affected Section 301 sectors, the study estimated that tariffs reduced imports from China by 13% and increased US production value by 0.4%. These are historical, sector-specific findings, not forecasts for 2026. The study explicitly did not assess the complete economy-wide net benefit or the national-security value of the policies. Source: USITC, March 2023.

The lesson is that protection can help particular producers while imposing costs on other domestic businesses. Judging the policy requires examining both groups and the strategic objectives behind it.

7. What traders and investors should watch

ATN’s market interpretation is conditional: persistent import-cost pressure could complicate disinflation, but this report alone does not determine the next interest-rate decision or the direction of equities.

• Inflation transmission: do producer and consumer goods prices follow, or do firms absorb costs?
• Corporate margins and investment: watch earnings commentary, capital-spending plans and equipment demand.
• Trade implementation: distinguish announced negotiations from duties and exemptions actually taking effect.
• China-related exposure: examine both reliance on Chinese inputs and reliance on Chinese customers.
• Market confirmation: assess Treasury yields, inflation expectations and sector performance together. Rising costs and weakening demand can pull markets in different directions.

Conclusion: judge the trade war by costs, capacity and market access

The August data support a clear concern: imported business inputs are becoming more expensive, including the capital goods needed to expand US production. Tariffs can add to those costs where applicable, although the import-price indexes do not quantify that additional burden or establish how much policy caused supplier prices to rise.

Tariffs can serve bargaining, resilience and strategic-industry objectives. Their economic value depends on whether they produce durable domestic capacity and better market access at an acceptable cost to consumers, manufacturers and exporters. Protection without competitive investment risks preserving higher costs; targeted protection combined with successful capacity expansion can have a different outcome.

For China specifically, the modest improvement in US terms of trade is insufficient to declare victory or failure. The stronger test is whether the policy reduces critical dependencies, supports productive US investment and secures export opportunities without imposing disproportionate costs on the businesses it aims to strengthen.

For markets, the central question is whether trade policy ultimately improves supply and productivity—or prolongs cost pressure while restraining demand. The answer will emerge through prices, margins, investment and trade volumes, rather than tariff announcements alone.