US import prices surge 7.7% annually, biggest gain since August 2022

Import prices rose 0.3% in June against expectations for a drop, with costs of Chinese goods hitting levels not seen since 2008.

Import prices unexpectedly rose 0.3% month-over-month in June, defying the consensus forecast for a 0.8% decline, as costs of goods from China posted their largest monthly gain since January 2008.

"For the first time in my tenure, I'm hearing from businesses who say they think we need to take action to curb inflation, and from consumers who can't make ends meet about a growing sense of despair," Cleveland Fed President Beth Hammack said in a LinkedIn post Friday, adding that policy needs to be tighter.

On an annual basis, import prices jumped 7.7%, the largest increase since August 2022 and above the 7.1% annual gain recorded in May. The advance was broad-based: prices for industrial and service machinery drove costs higher, while computers, peripherals, and semiconductors also rose — a potential reflection of the artificial intelligence infrastructure buildout, the Bureau of Labor Statistics said. Those gains offset a 0.4% decline in fuels and lubricants, which had surged 12.6% the prior month. Import prices from China rose 0.9% month-over-month, the biggest monthly move in more than 18 years, and were up 1.3% on a 12-month basis — the largest yearly gain since the period ending November 2022.

The surprise upside in import costs complicates the Federal Reserve's path back to its 2% inflation target. Consumer prices rose 3.5% from a year ago in June and wholesale costs climbed 5.5%, even after both measures moderated on a monthly basis. Fed Chair Kevin Warsh told Congress this week he did not view the softer June inflation reports as evidence the central bank's work was finished, while Dallas Fed President Lorie Logan said benchmark rates should be "modestly higher."

Export prices fell 0.6% month-over-month in June, the first monthly decline since May 2025, though they remained up 10.2% from a year earlier. Export prices to China slipped 0.2% on the month. The divergence between import and export price trends points to persistent cost pressures embedded in the US supply chain, particularly from China. The 0.9% monthly jump in Chinese import costs — the largest since the global financial crisis — may reflect the impact of tariff measures and shifting trade flows as companies navigate an increasingly fragmented trade environment.

Interest-rate markets are pricing in about 6 basis points of tightening for the Fed's August meeting, with a cumulative 18 basis points of hikes now expected for the remainder of 2026, according to overnight index swap data. The next Fed decision is scheduled for late July, followed by the September meeting where the Summary of Economic Projections will be updated.

The last time import prices rose this sharply on an annual basis was in August 2022, when the Fed was in the midst of its most aggressive tightening cycle in decades. At that time, the fed funds rate stood at 2.25%-2.50% before climbing another 300 basis points over the following nine months. Today, with the fed funds rate at 5.25%-5.50% and inflation still above target, the scope for further tightening is narrower — but the data suggests the door is not yet closed.

This article is for informational purposes only and does not constitute investment advice.