Tariff Pass-Through Added 0.8% to Core PCE, Fed Study Finds

What the Fed's real-time tariff tracker found

More than a year and a half after Washington started its biggest round of tariff increases in generations, economists inside the Federal Reserve system broadly agree that American consumers are paying for them. They agree less on how much of today's inflation the tariffs explain.

The most influential estimate comes from a Federal Reserve Board staff note by Robert Minton, Madeleine Ray and Mariano Somale. It extends a method Minton and Somale introduced in May 2025 for spotting tariff effects in consumer prices using only public data.1 The method has two steps. First, the authors work out how much each personal consumption expenditure (PCE) category should rise if tariffs were passed through dollar for dollar, given the tariffs actually in force and how much of each category is imported. Second, they test whether real prices moved in line with those predictions.1

The update found that tariffs put in place through November 2025 raised core goods PCE prices by 3.1 percent through February 2026. That accounts for all of the core goods inflation above pre-pandemic rates and adds about 0.8 percent to core PCE prices overall.1 The price effects built gradually. Seven months after a tariff took effect, the cumulative rise matched full dollar-for-dollar pass-through. Put simply, a retailer whose cost for a product rises $1 because of a tariff ends up charging about $1 more.1 The authors concluded that pass-through from the 2025 tariffs was effectively complete. They also found the 2025 tariffs reached consumers more weakly and more slowly than the 2018–19 tariffs on China.1

The earlier version was much more tentative. In May 2025 it found only partial pass-through from the early tariffs on Chinese imports, worth about 0.1 percent of core PCE prices.7

Twenty-six tariff events, one regression

The 2026 note had a practical difficulty to solve: the tariffs came in many overlapping waves. The authors list 26 separate tariff actions between February and November 2025, including:

• China: the fentanyl-related duties and a 125-point reciprocal rate in April, which was cut back in May.1
• Sector tariffs: duties on steel and aluminum, autos, auto parts and copper.1
• Trade deals: agreements with the EU, Japan and South Korea that set many rates at 15 percent.1
• Punitive duties: 40 percent on Brazil and 25 percent on India.1

To handle this, the researchers used a distributed-lag regression in which prices in any given month can respond to several tariff waves at once. Category fixed effects control for each category's own trend, and time fixed effects control for economy-wide shocks.1

Policy changes matter in these results. By the note's estimate, the 10-point tariff cut on China in November 2025 prevented a cumulative 0.9 percent increase in core PCE prices by June 2026. That cut offset much of the effect of the reciprocal tariffs that took effect in August.1

Where other Fed research agrees

The headline numbers hold up well against other work. In October, New York Fed economists Mary Amiti, Sebastian Heise and David Weinstein reported that tariffs had added 2.9 percentage points to consumer goods inflation by February 2026. Without the tariffs, they estimate, goods prices would have fallen slightly.11 That nearly matches the Board's 3.1 percent figure, even though the two teams used different price indexes and methods.

The Dallas Fed reached a similar result another way. Instead of announced tariff rates, it used realized rates, meaning duties actually collected as a share of import value. It estimated that tariffs added about 0.80 percentage points to 12-month core PCE inflation in March 2026, and that core inflation would have been 2.3 percent without them.25 Dallas researchers also found the effect peaked in the first quarter of 2026, at a level consistent with full pass-through. They described their findings as consistent with the Board note, though the two differ on how much of the second-half 2025 inflation tariffs explain.25 Realized tariff rates finished 2025 at 9.4 percent. That was below what the announcements implied but still the highest in decades.29

The evidence also contradicts the administration's view of who pays. A White House spokeswoman repeated that foreign exporters ultimately bear the cost.23 The New York Fed team instead found that roughly 90 percent of tariffs show up in U.S. import prices, so foreign sellers absorbed very little.11 Earlier work by Fed and Columbia University economists put the share paid by Americans at 94 percent.

"Full pass-through" or "a quarter"? Mostly a question of measurement

Two headlines seem to conflict. One says pass-through was "dollar for dollar." The other says only about 26 percent of a tariff reaches consumer prices.123 Our reading is that both are right because they measure different things.

• The Board note compares prices against what full pass-through of the tariff cost would imply, after accounting for each category's import share and assuming retailers keep the same dollar margins.1
• The New York Fed paper compares price changes with the tariff rate itself. In its accounting, about 90 percent of a tariff reaches the border price. Then a 10 percent rise in import and producer prices raises retail prices by 5.6 percent, because distribution costs make up about half of what shoppers pay.11

Combined, those steps mean a uniform 10 percent tariff lifts consumer goods prices by about 2.6 percent after a year.11 Harvard's Alberto Cavallo and coauthors, using online retail prices, likewise found that about a quarter of tariff increases reached consumers after seven months.19

The New York Fed work adds one important finding: tariffs raise prices of American-made goods too. About a third of the total consumer price effect comes from U.S. producers paying more for imported inputs and facing less competition from imports.13 That indirect effect builds more slowly, so the full impact takes about a year to show up.11

The two studies also differ on timing. The Board note found pass-through complete after seven months. The New York Fed's indirect channel takes about a year.111 Retail scanner data analyzed by Board economists showed prices rising gradually rather than jumping all at once. By December 2025, retail prices of goods imported from China were about 8.5 percent higher than a year earlier.8

The dissent from Minneapolis

The Minneapolis Fed has pushed back hardest. In April it argued that tariffs could not explain rising goods inflation. When it compared predicted and actual price changes category by category, the two were negatively correlated. Pharmaceuticals, clothing and motor vehicles did not rise in line with their tariff exposure.24

By August, Minneapolis had changed its view in part. Data through July 2026 showed a clearly positive link between tariff exposure and excess inflation, led by apparel. Annual inflation in clothing and footwear rose from 0.3 percent to 3.5 percent.21 Still, it estimated tariffs added only 0.2 to 0.4 percentage points to core PCE inflation. It found that AI-driven demand for computer hardware added about as much.21 Core PCE inflation reached 3.3 percent in July, which Minneapolis described as the highest outside the pandemic since the early 1990s.21

The Board authors raise a similar caution in their own paper. If they drop the time fixed effects, their estimate of the tariff effect on core PCE prices falls to a peak of about 0.4 percent, roughly half the baseline.22 They suggest tariffs may also weaken overall goods demand, which would push all prices down a little and offset part of the increase in relative prices.22

We read the evidence this way: the case that tariffs raised relative prices of exposed goods is very strong. The case that they explain all of the excess core goods inflation is weaker, and the 0.8 percent figure is best treated as an upper bound.

Why it matters now

Policy has changed since these studies were done. A Supreme Court ruling ended the tariffs imposed under emergency powers and replaced them with a 10 percent surcharge. The New York Fed projected that the tariff effect on goods prices would fall to about 2 percent by August 2026.11 New tariffs on Canadian goods took effect that month and are still passing through, so the effect is expected to rise again.11

The price level will stay higher even as the inflation rate eases. Business Insider, reporting on the New York Fed paper, noted that consumers face elevated prices into 2027.23 Minneapolis also points to more pass-through ahead. New-vehicle prices have not yet jumped, auto-parts tariffs have been announced, and a New York Fed survey found firms planning further tariff-related price increases.21

For the Fed, this changes the inflation picture. If most of the tariff pass-through is already finished, as the Board note argues, core goods inflation should soon fall back toward pre-pandemic levels.22 If Minneapolis is right, core PCE inflation would still be about a point above the 2 percent target even without tariffs.21 The Fed now has decent tools for measuring tariff effects as they happen. The open question is how much of the remaining inflation they do not explain.