US producer inflation muted in March before import tariffs blast

US producer prices notched their first monthly decline in nearly 1/2 years in March as gasoline prices plunged, but tariffs on imported goods are expected to significantly boost inflation in the coming months.

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Trade tensions have escalated between the United States and China, the main source of imports, making last month's producer price index report published by the Labor Department on Friday dated. The impact of tariffs is already evident in surging prices for steel mill products.

President Donald Trump this week hiked duties on Chinese goods to 1258, even as he delayed reciprocal tariffs on other trade partners for 90 days. Beijing on Friday retaliated with a 258 tariff of its own. Trump has maintained a 108 blanket duty on almost all US imports as well as a 958 tariff on motor vehicles, steel and aluminum.

“The March PPI report says next to nothing about the inflation outlook, which depends overwhelmingly on tariffs,” said Bill Adams, chief economist at Comerica Bank. “Inflation will accelerate considerably if the tariffs stay in place.”

The producer price index for final demand dropped O.4% last month after an upwardly revised 118 gain in February, the Labor Department's Bureau of Labor Statistics said. Economists polled by Reuters had forecast the PPI rising 0.28 after a previously reported unchanged reading in February.

In the 12 months through March, the PPI increased 2.78 after advancing 3.98 in February.