Inflation on many everyday items was entirely due to tariffs, NY Fed says

How much higher were prices for the 67 categories of goods because of tariffs, and what does “2.9 percentage points” mean?

Prices for the 67 categories were 2.9 percentage points higher by February because of tariffs. That is the estimated gap between prices with the levies and the prices that researchers believe would have occurred without them. The result shows a broad effect across the studied goods, not just one isolated product.

A percentage point measures a difference between rates or changes. For example, if prices would have risen 1% without tariffs but rose 3.9% with them, the tariff-related gap would be 2.9 percentage points. The article does not identify the 67 categories, so it does not provide a typical item price or a category-by-category breakdown.

The comparison is especially important because prices without the levies would have pulled back by almost 1%. The researchers also found that each percentage-point increase in the average tariff raised consumer-goods prices by roughly a quarter of a percent a year later.

What is a tariff, and how does it raise the price of an imported product in the United States?

A tariff is a charge placed on goods entering a country. In the United States, it raises the cost of an imported product before that product reaches shops or customers. The article discusses tariffs as levies affecting products imported from many countries, with current rates often about 10%.

For example, if an imported product faces a tariff, the business bringing it into the United States has a larger total cost. That business might accept a smaller profit, ask its supplier for a lower price, or raise the product’s selling price. U.S. companies using imported parts or materials can also face higher costs and adjust their own prices.

The article reports that around 26% of last year’s tariff increases ended up trickling into higher prices. It also says indirect effects mattered, because companies using imported inputs passed some increased costs through their products. Thus, a tariff can reach consumers even without a direct price increase by the foreign exporter.

Who ultimately paid the tariff costs in this case—foreign exporters, U.S. companies, or consumers—and how were those costs passed along?

The costs were not borne by just one group. The White House maintained that foreign exporters would ultimately pay because they rely on access to the American economy. But the New York Fed found that tariff-related costs reached prices paid by U.S. consumers, while U.S. companies also faced higher costs.

The mechanism was pass-through. Businesses importing goods could absorb the added expense, or they could raise prices. Companies that use imported parts and materials faced a second-round increase and could also adjust prices. The researchers found that around 26% of last year’s tariff increases ended up trickling into higher prices. That figure shows a measurable consumer effect, even if the entire tariff was not passed through.

The study also found that roughly two-thirds of the tariff-related price impact came directly from the levies. The remaining increase came from knock-on effects. So consumers paid through higher prices for some goods, while companies absorbed or redistributed other costs across their operations.

Why can tariffs raise prices even for products that are not imported directly?

A product does not need to be imported whole to feel a tariff’s effect. Many U.S.-based companies use imported parts, materials, or other inputs. If tariffs make those inputs more expensive, the company’s production costs rise even when the finished product is made in the United States.

For example, a domestic manufacturer may import a component and use it in a finished product. A tariff raises the component’s cost. The manufacturer then faces a choice: absorb the expense, reduce its margin, or raise the finished product’s price. Suppliers and other businesses can create additional knock-on effects as costs move through the production chain.

The New York Fed estimated that roughly two-thirds of the tariff-related price impact came directly from the levies. The rest came from these indirect effects. Its authors wrote that tariffs have a larger and more drawn-out impact on consumer prices than the direct effect alone would suggest.

How large were the direct effects of the levies compared with the indirect effects from imported parts, materials, and other business costs?

The New York Fed divided the tariff-related price impact into two broad parts. Roughly two-thirds came directly from the levies themselves. The remaining increase came from knock-on effects, including higher costs for U.S. companies that use imported parts and materials.

The direct effect occurs when a tariff makes an imported good more expensive. The indirect effect occurs later in the supply chain. A company may pay more for a foreign component, material, or other input, then pass some of that higher cost into the price of its own product. This can affect products assembled or sold in the United States.

The split matters because the indirect portion can make price effects wider and more persistent. The study’s authors said tariffs have a larger and more drawn-out impact on consumer prices than the direct effect alone would suggest. The article also reports that annual price growth in the tracked goods peaked at the start of 2026.

Why might tariff-related price increases continue into 2027 even after some tariffs were struck down or reduced?

Tariff-related price increases can continue after policy changes because the effects are not limited to the first border charge. Companies using imported parts and materials may face later cost increases, and those costs can move through supply chains. The New York Fed described the overall impact as larger and more drawn out than the direct effect alone.

The article reports that annual price growth for the tracked goods peaked at the start of 2026. It also says consumers are still expected to pay elevated prices into 2027. A later slowdown in price growth would not necessarily return prices to their earlier levels; it could simply mean prices are rising more slowly.

The Supreme Court struck down many of Trump’s tariffs in February, leading to billions of dollars in retailer refunds. However, the White House vowed to use alternative measures, and many imports now face tariffs of about 10%. Those continuing levies could help keep prices elevated.

What is inflation, and how is a slower rate of price growth different from prices actually falling?

Inflation is the rate at which prices across an economy rise over time. When inflation is high, households generally need more money to buy the same goods and services. In this article’s context, tariffs contributed to higher prices for many consumer goods and kept their price growth above the level researchers estimated without the levies.

A slower inflation rate means prices are still going up, but at a reduced pace. For example, prices rising 4% one year and 2% the next are still higher in the second year than the first. They have not fallen; they have simply increased more slowly. Prices fall only when the overall price level declines, which is different from slower inflation.

This distinction helps explain the New York Fed’s outlook. Annual price growth in the tracked goods peaked at the start of 2026, but consumers were still expected to pay elevated prices into 2027. A peak in growth does not automatically reverse earlier increases.

Key Facts:

📌 Tariffs made prices 2.9 percentage points higher across 67 studied goods categories.

📌 The researchers did not identify the 67 categories they evaluated.

📌 Without tariffs, studied product prices would have declined by almost 1%.

📌 A tariff is a charge on imported goods.

📌 Imported products from many countries now often face tariffs of about 10%.

📌 Around 26% of last year’s tariff increases reached higher prices.

📌 The White House said foreign exporters would ultimately bear tariff costs.