I think there is a lot of confusion about the effect of import prices on inflation (including some confusion in my head as well). The right way to count is not obvious to me, but I’ll try to run a simple dice.

The imports are 13%-14% of GDP. Exports are 8% of GDP. If we take out exports because they are gone and irrelevant the imports will be 15% of GDP without exports. Suppose the worst happens and import prices go up 10% this year. It will take only 1.7% decline of domestic prices to completely negate the effect of those import prices. And this amount of price adjustment won’t take anything extraordinary to happen. The overbuild, overstuffed and overstocked economy can take off few percentage points out of prices here and there as soon as half a year after recession starts. Just yesterday we learned that commercial real estate values will decline over 21% in two years. And auto sales are cliff diving, suggesting deep discounts. I think oil has to go to $150 just to offset those two developments price-wise.