Federal Reserve: Without Tariffs, Inflation Would Have Dropped to Pre-Pandemic Levels During 2025

Tariffs implemented last year by President Donald Trump’s administration are entirely to blame for the recent surge in prices for consumer and household goods.

Those tariffs have raised core goods prices by 3.1 percent, according to a new study by a trio of economists at the Federal Reserve. Those higher consumer prices were the result of retailers passing the cost of tariffs along the supply chain.

As of February 2026, the tariffs “can explain the entirety of the excess inflation in the core goods category since January 2025,” the economists concluded. “Our estimates indicate that tariff effects on prices gradually build over time, with cumulative effects seven months after implementation consistent with our theoretical measures of full dollar-for-dollar pass-through.”

The study used the personal consumption expenditures price index (PCE), which is published quarterly by the federal Bureau of Economic Analysis and differs in some small ways from the monthly consumer price index published by the Department of Labor. The most recent PCE index, published in February, showed that prices have increased by 2.8 percent over the previous year.

Without the price increases caused by the tariffs, price increases for household and consumer goods would have fallen below pre-pandemic trendlines, the Federal Reserve study found:

Shortly after announcing his sweeping trade barriers last April, the president claimed that foreign countries and corporations “probably would eat those tariffs.” Trump has continued to make that argument even as evidence showing the opposite has piled up. In a January op-ed for The Wall Street Journal, the president wrote that the “burden, or ‘incidence,’ of the tariffs has fallen overwhelmingly on foreign producers and middlemen, including large corporations that are not from the U.S.”

The new study is just the latest evidence that American consumers are basically paying the full cost of Trump’s tariffs. A paper published in February by economists from the Federal Reserve and Columbia University showed that Americans are paying 94 percent of the tariffs’ costs. Other studies from a variety of sources have found similar results. One recent paper looking at wine tariffs from Trump’s first term found that consumers actually paid the full cost of the tariff and then some, thanks to higher markups along the supply chain.

None of this should come as a surprise to anyone outside the White House. Tariffs raise prices. That is the only thing they do.

Indeed, if tariffs did not raise prices, they would be completely ineffective. The entire theory behind Trump’s use of tariffs is that hiking the price of imports will make domestically produced items more favorably priced. If foreign companies “eat” their cost, they would be useless as a protectionist policy.

So the contradictions in Trump’s tariff policies have always been apparent. But they are now becoming impossible to ignore.