As are all import prices.
Chinese import prices have fallen 3.3% (log terms) since mid-2014; overall non-petroleum by 4.2%. While the USD has appreciated less against the CNY than against a broad basket, the implied exchange pass through is not substantially different.
Figure 2: Log goods import prices from China (blue), and USD/CNY exchange rate (red), both normalized to 2014M06=0. Exchange rate normalized so down is dollar appreciation. Source: BLS and Federal Reserve Board and via FRED, and author’s calculations.
Figure 3: Log goods import prices ex.-petroleum (blue), and USD exchange rate against broad basket (red), both normalized to 2014M06=0. Exchange rate normalized so down is dollar appreciation. Source: BLS and Federal Reserve Board via FRED, and author’s calculations.
The implied exchange rate pass-through for imports of Chinese goods is about 42.9%, for imports of nonpetroleum goods about 23%. The former is consistent with my previous back-of-the-envelope estimates, discussed in this post.
If the USD rises another 10% (as discussed in this post), then nonpetroleum goods prices could be expected to decline an additional 2%.
To determine the drop in prices of imported Chinese goods, one would need at a minimum the further drop in the CNY relative to USD. All I can say is that President-Elect Trump’s pronouncements on US-China relations can only serve to accelerate financial capital net outflows, thereby putting further downward pressure on the CNY’s value. I don’t know if that is what the President-Elect intends, but that’s what he’s going to get…
Update, 12/12 9PM Pacific: Paul Mathis observes:
Trump is also doing a great job of lowering the value of the Mexican peso against the dollar. Since he is not likely to terminate NAFTA as he promised or negotiate a better deal, Mexico will be the final destination for even more American jobs.
This is an excellent observation, as shown in Figure 4:
Figure 4: Log goods import prices from Mexico (blue), and USD/MXN exchange rate (red), both normalized to 2014M06=0. Exchange rate normalized so down is dollar appreciation. December observation for exchange rates is through 12/9/2016. Source: BLS and Federal Reserve Board and via FRED, and author’s calculations.
With the recent depreciation of the Mexican peso, one should expect further decline in import prices of goods originating in Mexico.