Researchers at the Federal Reserve Bank of New York estimate that tariffs imposed in 2025 and 2026 added 2.9 percentage points to 12-month consumer-goods inflation by February 2026. Their Oct. 6 analysis measures prices for a defined set of goods, not headline inflation across the economy.
The accompanying Staff Report estimates that about 26% of an increase in tariffs eventually passes through to consumer prices. About 64% of that effect comes directly from higher prices for imported goods. The remaining 36% appears indirectly in goods made in the United States.
Why US-made goods also got pricier
Tariffs can raise domestic prices even when the finished product is assembled in the United States. American manufacturers often rely on imported parts and materials, so duties increase their production costs. Domestic producers can also raise markups when higher-priced imports reduce competitive pressure.
Those indirect effects take longer to arrive. The researchers found that import prices respond almost immediately, while the effects on US producer prices take roughly nine to 12 months to move through supply chains. At the retail level, they estimate that a 10% tariff-driven increase in import and producer prices raises consumer prices by about 5.6%.
What the 2.9-point estimate covers
The researchers compared price changes across 67 non-oil consumer-goods categories with different levels of tariff exposure. They weighted the categories using 2022 consumer spending and held economy-wide factors such as wages, demand, exchange rates and monetary policy fixed.
That scope matters. Services, which make up about two-thirds of the consumer basket, are excluded. The model also does not capture every possible way tariffs could affect the wider economy. Within those limits, the authors estimate that goods prices would have fallen slightly without the tariff effects.
Inflation can fade while prices stay higher
The study separates the level of prices from their annual rate of change. It estimates that tariffs' effect on the consumer-goods price level peaked near 3% in February 2026 and eased to about 2% by August after tariffs were reduced earlier in the year.
The contribution to 12-month goods inflation fell toward zero as the large 2025 tariff increases moved out of the annual comparison. That does not mean prices returned to their earlier path. The researchers' central point is that tariffs left the price level higher even as their measured effect on the inflation rate faded.
