Tariffs Added 2.9 Points to Goods Inflation, NY Fed Study Finds

Tariffs reversed a decline in goods prices

The Trump administration has argued that foreign exporters pay for its tariffs. New research from the Federal Reserve Bank of New York says that, for many consumer goods, that has not happened. Economists Mary Amiti and Sebastian Heise of the New York Fed, working with David E. Weinstein of Columbia University, estimate that the tariffs imposed in 2025 and early 2026 had added 2.9 percentage points to goods price inflation by February 2026. Without those tariffs, they estimate, goods prices would have fallen slightly.1

The findings appeared on October 6 on the bank's Liberty Street Economics blog, which summarized a longer staff report.17 The study covers 67 categories of consumer goods excluding oil, weighted by 2022 consumer spending.117 It compares goods that were heavily exposed to tariffs with goods that were less exposed and holds economy-wide factors fixed, including wages, exchange rates, consumer demand and monetary policy.1 Under that counterfactual, prices in the sample would have dropped by almost 1% instead of rising.28

The researchers describe what came before the tariffs. Goods inflation had settled back near its slightly negative pre-pandemic average for most of 2024, began rising late that year, and accelerated through 2025.1 The authors attribute that rise to the tariffs. That is the reason this paper may end up shaping the affordability debate.

How a border tax ends up in store prices

The paper is useful because it traces how tariff costs move from the border to the checkout counter. At the border, foreign exporters cut their prices very little. Nearly 90% of the 2025 tariffs showed up in U.S. import prices, and most of that increase arrived in the first month after a tariff took effect.1 The researchers say the result holds even after accounting for the weaker dollar, which also pushed import prices up during this period.1

Retail prices rise by less than import prices because a large part of a store price covers transportation, wholesaling and other distribution costs.16 The authors estimate that a 10% tariff-driven rise in import and producer prices raises retail prices by about 5.6%.1 Combining the steps, a 10% tariff on all imports would leave consumer goods prices about 2.6% higher after a year. That is roughly a quarter of the tariff rate, or about 26% pass-through.1

The tariffs also raised prices on goods that were never imported. About two-thirds of the consumer price effect comes directly from more expensive imports. The other third comes from U.S.-made goods.1 That happens in two ways. Domestic manufacturers pay more for imported parts and materials, and they raise their own markups when competing imports cost more.1 These indirect effects take longer to appear, typically six to twelve months as costs move through supply chains. As a result, the full effect of a tariff takes about a year to show up.19 In the authors' words, tariffs have "a larger and more drawn-out impact on consumer prices than the direct effect alone would suggest."2

This is the most important point for the trade-war debate. Tariffs are supposed to protect domestic producers, but by the paper's estimate, some of those producers used that protection to raise their prices.

The White House response

The administration has not changed its position. White House spokeswoman Taylor Rogers said the administration has consistently held that foreign exporters dependent on the U.S. market will ultimately bear the cost of tariffs.2 She also pointed to nearly 20 trade deals that she said protect American workers from unfair trade practices.11 Earlier in the year, White House economic adviser Kevin Hassett criticized previous New York Fed tariff research for focusing too narrowly on price changes. He argued it ignored consumers switching to other products and cited what he described as a $1,400 gain in real wages.13

The new paper does not settle every question Hassett raised. It is hard to square with the claim that foreigners pay, though. An import pass-through rate near 90% means foreign exporters absorbed very little of the cost.5 Before this paper, the administration's position was arguable. After it, the evidence weighs clearly against it.

What the 2.9 figure does and does not measure

Outlets agreed on the main numbers but described them differently. CNBC's headline said inflation on many everyday items was "entirely due to tariffs," and Business Insider called tariffs the sole driver of goods inflation.211 Those descriptions are accurate for the sample studied, but they can easily be read as claims about the whole economy, which the paper does not make.

The paper excludes services, which make up about two-thirds of household spending.1 The authors also say their method cannot determine how much of the broader price movements was itself caused by tariffs.1 Daybreak Wire looked at the size of the sample. The 67 categories account for about 20.2% of the overall consumption basket. Weighted across all spending, the 2.9-point effect works out to roughly 0.6 points of overall inflation, or about 0.8 points if all goods behaved the same way.4 The same outlet noted that the paper calls its findings preliminary. It also noted that the 2.6% estimate for a broad 10% tariff has a wide 95% confidence interval, from 1.45% to 4.38%.4 Breitbart Business Digest made a similar argument from the right: the paper never claims tariffs raised overall inflation by 2.9 points.4

That criticism is fair on the numbers, but it does not undercut the paper's main point. Roughly six-tenths of a point of overall inflation is still a significant cost, and it is a cost that resulted directly from policy. The paper's strongest contribution is not the size of the headline figure. It is the finding about who pays: American importers, producers and shoppers, not foreign exporters.

Inflation is easing, but prices stay higher

The researchers separate the inflation rate from the price level. The tariffs' effect on the level of goods prices peaked near 3% in February 2026.1 That was the month the Supreme Court struck down the tariffs imposed under emergency powers. A lower 10% surcharge replaced them.115 By the authors' estimates, the price-level effect eased to about 2% by August, and the tariffs' contribution to twelve-month goods inflation fell to about zero.1

Prices have not fallen back, though. The indirect effects from U.S.-made goods are fading more slowly than the direct effects because domestic producer prices adjust gradually.1 The authors expect the tariff contribution to inflation to turn negative for a time as the large 2025 increases drop out of the year-over-year comparison. They then expect it to turn slightly positive again by mid-2027 as tariffs on Canadian goods pass through. Those include tariffs imposed in August 2026 and an announced January 2027 increase on Canadian cars, trucks and auto parts.1 Consumers should expect elevated prices to last into 2027.8

The Supreme Court ruling also left an awkward result. The decision led to billions of dollars in tariff refunds to retailers.15 According to Hoodline, which cited the Center for American Progress, those refunds are going to corporate importers rather than the shoppers who paid the higher prices.13 Consumers carried most of the cost, while importers are collecting the refunds.

Politics and the broader inflation picture

The paper comes at a sensitive time. The midterm elections are on November 3, and cost of living is the top issue for voters.189 Overall consumer prices rose 3.4% year over year in August, driven mostly by the oil price surge linked to the Iran war. The September report is due October 14.14 Energy rose 16.3% in the August data and gasoline 27.4%, far larger than the tariff effects the paper measures.4 Tariffs are therefore not the main driver of current overall inflation. The paper's argument is narrower: before the tariffs, goods prices were on course to fall.

Media coverage was uneven at first. Media Matters reported that by the end of October 7, the five largest U.S. newspapers had not mentioned the research. In the same period, CNN aired a three-minute segment, MS NOW gave it about a minute, and Fox News did not cover it.3 Wider pickup followed on October 8.211

What the paper shows

The paper's narrower claims are well supported, and those are the ones that matter for policy. Tariffs pass through to import prices almost completely and almost immediately. About a quarter of the tariff rate reaches retail prices within a year. Domestic producers raise their own prices when protected from competition. After rates are cut, the higher prices fade only slowly.1 The administration can still argue that its trade deals bring strategic or industrial benefits. The New York Fed's evidence leaves little support for the claim that American consumers were not paying for the tariffs.