New York Fed Finds Tariffs Account for 100% of Consumer Goods Inflation — But the Full Impact Won't Arrive Until 2027

The Federal Reserve Bank of New York published a landmark study this week concluding that President Donald Trump's tariff policy pushed consumer goods prices 2.9 percentage points higher as of February 2026, accounting for the entirety of goods-level inflation during the period examined — since, absent the levies, the same basket of goods would have actually declined by roughly 1%.

The research, authored by Fed economists Mary Amiti and Sebastian Heise alongside Columbia University professor David Weinstein, analyzed 67 categories of non-oil consumer goods and arrived at a striking conclusion: nearly 90% of tariff costs were passed through to import prices, directly contradicting the administration's repeated claim that foreign exporters would absorb the burden.

The Three Channels Hitting Consumer Wallets

Approximately two-thirds of the 2.9-percentage-point price impact stems directly from tariffs raising the cost of imported finished goods, while the remaining one-third flows through indirect channels — higher costs for imported components used by U.S. manufacturers and domestic producers opportunistically raising markups as competing imports grew more expensive.

A critical and underappreciated finding is the time lag: while import prices react almost immediately to new tariffs, indirect effects on U.S.-made goods take nine to 12 months to work through supply chains, meaning the full inflationary punch of any levy needs roughly a year to land.

For every percentage point increase in average tariff rates, consumer goods prices rise by approximately one-quarter of a percentage point after one year, with about 26% of any tariff increase ultimately reaching consumers across all three transmission channels.

The Peak, the Reprieve, and What Comes Next

The tariff effect on consumer goods prices peaked near 3% in February 2026 but retreated to approximately 2% by August, following the Supreme Court's decision earlier this year to strike down tariffs levied under emergency powers.

However, the researchers project the tariff contribution to goods price inflation will edge higher again by mid-2027, driven by existing tariffs on Canadian goods and a planned increase on Canadian automobiles set for January 2027 — a detail that suggests the inflation story is far from over.

Even as the inflation rate effect fades over time, the price level for consumer goods remains permanently elevated relative to what it would have been absent tariffs, an important distinction for households already squeezed by cumulative cost increases.

Not Everyone Is Convinced

Some critics argue the paper's methodology suffers from a "missing-intercept problem" — meaning it measures how tariff-exposed goods performed relative to less-exposed goods but cannot fully isolate economy-wide price effects, potentially overstating the aggregate inflation contribution.

These skeptics note the 2.9-percentage-point figure applies to only about 20% of the consumer basket, translating to roughly six-tenths of a percentage point contribution to overall consumer prices, and that both headline and core inflation actually declined over the period studied.

Why the Timing Matters

The findings arrive at a politically charged moment, with November midterm elections approaching and 78% of Americans blaming administration policies for rising costs — a backdrop that could amplify the study's influence on both policy debate and market expectations for the Fed's rate path.

Nevertheless, the study represents the most comprehensive Fed research to date on how tariffs transmit through the American economy, and its nine-to-12-month lag finding implies that the full cost of tariffs imposed in early 2026 may not be fully visible in price data until well into next year — precisely when voters head to the polls.

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On the date of publication, Sarah Holzmann did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.