How Fast Do Tariffs Pass Through into Consumer Prices?

There has been a lot of interest in how tariffs affect consumer prices (for example, Cavallo et al. 2021, 2025). In this post, we present results from our new research paper that estimates the effects of the 2025-26 tariffs on retail consumer prices. We find that for every percentage point increase in average tariffs, consumer goods prices increase by about a quarter of a percent after one year. Roughly two-thirds of the effect arises because tariffs raise the prices of imported consumer goods. The remaining third arises indirectly: tariffs increase the prices of goods made in the U.S. because producers pay more for imported parts and materials, and because producers raise their markups when competing imports cost more. The effects differ in their timing. Prices of imported goods respond quickly to tariffs, while prices of U.S.-made goods adjust over six to twelve months as higher costs move through the supply chain.