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Paying More and Buying Less: 2025 Tariffs and U.S. Household Spending

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Abstract

This paper estimates the effects of the 2025 U.S. tariffs on household spending using transaction-level data linked to tariff exposure and a tariff sentiment survey. Comparing high versus low tariff-exposed categories, we find 15 to 20 percent price pass-through. At the mean increase in tariff exposure, prices rise by 1 to 2 percent while spending falls by roughly 4 percent. Survey evidence linking stated intentions to revealed behavior identifies a mechanism for the large spending response: reallocation toward essentials and trade-down within categories, concentrated among middle-income households with discretionary slack who express tariff concerns. Low-income households bear a disproportionate welfare burden through regressive pass-through.

Suggested Citation

  • Leo Feler & Sinem Hacioglu Hoke, 2026. "Paying More and Buying Less: 2025 Tariffs and U.S. Household Spending," Finance and Economics Discussion Series 2026-035, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:103379
    DOI: 10.17016/FEDS.2026.035
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    Keywords

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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