Economic Report: Cost of imported goods sink in June, but the price drop won’t last once tariffs kick in

The cost of many imported goods are expected to rise in the coming months if trade tensions between the U.S. vs. China and other countries worsens. That could add to rising inflation at home.

The numbers: The cost of import goods fell sharply in June to mark the biggest drop in about a year and a half, though the respite is unlikely to be long-lived once tariffs between the U.S. and other countries go into affect.

The import price index sank 0.4%, the biggest decline since February 2016.

Excluding fuel, import prices dropped 0.3%, the government said.

What happened: The cost of imported oil and natural gas declined in June. Oil prices are likely to show an increase next month, but natural gas might not. They’ve been on the softer side recently.

The cost imported foods, consumer goods and autos also declined. That could be a result of foreign suppliers trying to sell lots of goods quickly before tariffs kicked in.

Big picture: Inflation has shot up over the past year owing to rising oil prices, higher rents and more expensive medical care, among other things. Higher labor costs and worker shortages are also contributing.

Read: Consumer inflation hits 6-year high, CPI shows

Also Read: Wholesale inflation jumps to six-year high

Import prices will are also adding upward pressure to inflation and the problem could get worse once tariffs go into affect on billons of dollars of Chinese and other imports. The rate of import inflation over the past 12 months climbed to 5.3% in June, the fastest pace in almost seven years.

Market reaction: The Dow Jones Industrial Average DJIA, -0.04% and the S&P 500 SPX, -0.12% opened modestly higher on Friday trades.

The stock market has been gyrating up and down in the past few months amid worries about a widening trade war. Both indexes have receded from record highs set earlier in the year.

Trade-war tracker: Here are the new levies, imposed and threatened

Also Read: Here’s when Americans will start feeling the pain from escalating Trump-imposed tariffs

The 10-year Treasury yield TMUBMUSD10Y, -0.26% was little changed at 2.85%. After reaching 3.1% last month, the yield has also fallen in response to growing trade tensions.

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