New York Fed: a point of tariffs lifts US goods prices about a quarter point within a year

Victoria Shinder07 October 2026, 07:332 min read

New York Fed economists published estimates on 6 October of how fast the 2025-26 tariffs pass into US retail prices, summarising a new research paper on Liberty Street Economics.

The headline. For every percentage point increase in average tariffs, consumer goods prices rise by about a quarter of a percent after one year. In a scenario with a 10% tariff on all imports, consumer goods prices would be 2.6% higher after twelve months.

Three channels.

• Direct: import prices rise almost one for one with tariffs in the first month; foreign exporters cut their prices very little, so about 90% of the tariffs passed through to US import prices, even after accounting for the dollar's depreciation. This accounts for about two-thirds of the consumer effect.
• Marginal cost: US producers pay more for imported parts and materials.
• Strategic complementarity: US producers of competing goods raise markups when imports cost more. The marginal cost channel is the larger of the two indirect ones.

Timing. Retailers pass on about half of the direct effect within three months and all of it by six. US producer prices barely move in the first six months and then roughly double their response over the next six. The full effect on consumer prices is reached only after about a year.

The retail step. Distribution margins make up about half of what consumers pay for goods, so a 10% tariff-induced rise in import and producer prices raises retail prices by 5.6%.

Where it stands. By February 2026, the authors estimate, tariffs had added 2.9 percentage points to consumer goods inflation, and without them goods prices would have fallen slightly. The effect on the goods price level peaked near 3% in February 2026, with indirect effects then about 30% of the total. Their forecast, holding tariffs at end-September levels apart from the announced January 2027 increase on Canadian vehicles and parts, has the effect on the price level easing from there.

Limits they state. The sample covers 67 non-oil goods categories and excludes services, about two-thirds of the consumer basket; the method compares more- and less-exposed goods and cannot say how much of broader price movements was itself caused by tariffs.