Marco Garofalo and Thomas Prayer
The US administration raised US import tariffs in April, reigniting trade tensions. This sparked concerns about cheaper exports being diverted to other markets, potentially lowering global prices. Using detailed product-level data, we build a novel timely indicator to consistently track trade prices across countries. Chinese export prices have risen less than global ones since April and remain below March levels. Prices of other Asian exporters, Canada and Mexico have also grown more slowly than global prices, but to a more limited extent, while export prices for Europe grew faster than global patterns. UK import prices mirror those in Europe, whereas US import prices (excluding tariffs) have declined since March 2025. Our results and future updates are publicly available online.
US import tariffs and trade prices
At the beginning of 2025, the US administration imposed new tariffs on Canada, China and Mexico. Subsequently, it rolled in broad-based tariffs on all US trading partners in April. New trade tensions erupted, with disputes still ongoing.
As was the case during the US-China trade tensions in 2018–19 (Amiti et al (2019), (2020); Cavallo et al (2021); Fajgelbaum et al (2019); Flaaen et al (2020); Ma et al (2021), many are now monitoring what is happening to the US economy and prices as a result of the 2025 tariffs (Auray et al (2025); Barbiero and Stein (2025); Baslandze et al (2025); Cavallo et al (2025); Minton and Somale (2025); and the budget lab (2025).
But US tariffs, in particular on China given its outsized role in world trade, might have effects on prices outside the US through trade reallocation (Fajgelbaum and Khandelwal (2022); Fajgelbaum et al (2024)). Several commentators and policymakers have voiced concerns that US tariffs might lead to products destined to the US market to be diverted to other destinations, increasing global competition and thus lowering prices.
Although monitoring potential deflationary pressures from trade diversion is of first-order importance for policymakers from central banks and competition agencies, tariff spillovers on third countries’ prices are surprisingly underexplored. To address this gap, we provide a simple yet powerful new tool to monitor the evolution of prices of traded goods in a timely and granular way.
A model for all seasons
Our approach boils down to constructing an index averaging prices of traded goods globally and separately for each country, after stripping out differences solely due to the composition of importers, exporters and products in trade data.
If you can do without the econometrics behind this, skip to the next section, where we discuss our results.
We estimate the following empirical regression model inspired by Bonadio et al (2020):
ycpjt = α + δcpj + δt + ucpjt (1)
Where y is the unit price (value over quantity) excluding tariffs reported by importer country c of product p and exporter country j in month t. We include a constant term α and δcpj importer product exporter fixed effects and the error term u. Standard errors are clustered at cpj level to plot 95% confidence intervals in the charts below.
Our objects of interest are the estimated coefficients on the time fixed effects δt, which effectively average across unit prices, after stripping out compositional effects with the cpj fixed effects. To interpret our estimated time fixed effects, we drop the one corresponding to March 2025, so that in effect we construct an index of the evolution of unit prices against that benchmark month. This means that our model can tell us what the change in prices since the introduction of broad-based US tariffs in April has been; however, it cannot tell us why this change has occurred, eg whether it was due to those tariffs.
We estimate this model using six-digit trade data in US dollars from UN Comtrade, after excluding oil products and other special categories. We use data on imports from this source for several reasons: (i) national accounts usually report price deflators with a lag and at a quarterly frequency, while our measures and updates are monthly – and thus more timely – and consistently estimated across a large sample of countries; (ii) import data are reported on a Cost, Insurance and Freight basis, which is more comprehensive that the Free On Board basis used for export data; and (iii) relying on import data means that we can monitor a country’s export prices via the import prices reported by its trade partners, deven in situations in which the country is yet to publish official export statistics.
Our sample includes 131 importer countries, 5,924 products and 245 exporter countries for all months since January 2022, the starting date of the new HS product classification, which we follow in order to identify the same products consistently over time. As of the time of writing, our latest data point is August 2025 or earlier in the year for most importers, although data for September 2025 is available for some countries – like Brazil – while the latest available data point for others comes much earlier (eg for France it is December 2024). Finally, we drop US imports, as we are interested in monitoring what is happening to prices outside the US. However, when we include the US, our results are unchanged.
In addition to being transparent, timely and granular, our framework is also very flexible and easy to extend. Are you interested in food prices? Intermediate products? Or, do you perhaps want to focus on certain countries? Simply add an interaction of your dimension of interest and the time fixed effects, and you are good to go.
We, for example, are interested in understanding whether the global picture from equation (1) might hide country-specific heterogeneity. We therefore estimate the following equation:
ycpjt = α + δcpj + δt + Σjβjcountryjδt + ucpjt (2)
Here, we add a new variable which interacts our time fixed effects with a dummy for individual countries of interest, equal to one if that country is the exporter in a transaction. We do this, instead of, for example, distinguishing between varieties that are and are not affected by US tariffs, because the scope of US tariffs imposed or threatened during the course of 2025 was so broad that more than 90% of our observations involve an exporter and a product that subject to new US tariffs. The control group for such an exercise would therefore be extremely limited, particularly given our fixed effects.
Monitoring export prices
Chart 1 plots the estimated fixed effects from (1): the pattern of the corresponding blue line suggests that world import prices – and equivalently world export prices, given that one country’s imports are another country’s exports – are up about 5% by August against March 2025, that is the month before broad-based US tariffs were introduced.
We can use (2) to understand what is happening to Chinese export prices. Since March 2025, Chinese export prices have grown significantly more slowly than World prices, as one can see by comparing the red and blue lines, and remain below March levels. As a robustness check for our approach, we confirmed this pattern in official Chinese export prices data.
One important caveat regarding interpretation: our model aims at monitoring rather than providing causal evidence. We are just slicing the data in a timely way, so that we can monitor whether the outlook for trade prices is evolving more in line with one hypothesis or another. For example, our results in Chart 1 would be consistent with early signs of deflationary pressures from trade diversion.
Of course, other factors might be at play, like seasonal forces or the effects of movements in exchange rates. These are, however, unlikely to explain the divergence between world prices and Chinese export prices. On the former, both the blue and red lines in Chart 1 incorporate potential seasonality from the Chinese data, so one might expect their comparison to be unaffected by seasonal factors. On the latter, the vast majority of Chinese exports are invoiced in US dollars, as is the case for most countries, and the Chinese Yuan’s appreciation against the US dollar since 2025 has been relatively small, although there have been stronger appreciations for other currencies such as the Euro. Thus, simply comparing the world and Chinese lines might to some extent over or understate the deflationary effects of trade diversions from US tariffs.
Chart 1: Chinese export prices have grown more slowly than global ones since March 2025
Note: Confidence intervals at 95%.
Sources: UN Comtrade and authors’ calculations.
What is happening for other exporters? As shown by the different panels A, B and C of Chart 2, world export prices have outpaced those of other Asian exporters, Canada and Mexico. However, these countries’ growth is still faster than that of Chinese prices, as shown by the fact that the red line in panel A of Chart 2 is below all the other lines over the second half of 2025. In contrast, the export prices of select European countries (panel D) seem to have been broadly in line with, or grown stronger than, our global benchmark. All in all, this evidence is consistent with deflationary pressures from trade diversion extending to countries other than China, for example economies specifically targeted by US tariffs such as Canada and Mexico or other export-focused Asian economies.
Chart 2: Export prices of Asian (European) exporters grew slower (faster) than global ones since March 2025
Panel A: Canada, China and Mexico
Panel B: India, Thailand and Vietnam
Panel C: Japan, South Korea and Taiwan
Panel D: France, Germany and Italy
Note: Confidence intervals at 95%.
Sources: UN Comtrade and authors’ calculations.
Monitoring import prices
Finally, we can turn to the other side of the coin: do these new patterns in export prices translate into changes to countries’ import prices? This is particularly relevant as the latter feed into the costs of imported goods that consumers buy and inputs that firms use in their production.
Chart 3 shows that UK import prices (the orange line) appear to have followed the global trend (the dark blue line). The UK’s other European peers, such as Germany and Italy, also seem in line with the world benchmark, while US import prices (excluding tariffs) have declined since March 2025.
Chart 3: UK import prices mirror Europe, whereas US import prices (excluding tariffs) have declined since March 2025
Notes: Confidence intervals at 95%. Germany changed trade reporting threshold in 2025, so we do not plot a line before that to maintain consistency in the series. France’s latest reporting month for its imports is December 2024, so we exclude it.
Sources: UN Comtrade and authors’ calculations.
Conclusion
We hope that our novel empirical model and publicly available data can provide policymakers and other stakeholders with timely insights in the near future, helping them calibrate their policy interventions, and understand whether the outlook is evolving in line with the narrative and views in their communications.
To this end, our measures and results are publicly available, and will keep updating them online.
Marco Garofalo works in the Bank’s Global Analysis Division and is a PhD student at University of Oxford and Thomas Prayer is Associate at Centre for Economic Performance at London School of Economics and Political Science.
If you want to get in touch, please email us at bankunderground@bankofengland.co.uk or leave a comment below.
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