Trump Tariffs Caused a 2.9 Percent Increase in the Price of Many Everyday Item and Also Raises the Prices of Domestically Produced Goods, Federal Reserve Study Finds

by Rod Williams, Oct. 8, 2026 - It amazes me that many people still believe the exporting country pays tariffs when goods are imported into the United States. They do not. No matter how often President Trump says or implies they do, they simply do not. The importer pays the tariff. The importer could be a wholesaler who then sells his imported goods to a retailer, or a large company that imports and retails. In any event, when the retailer sells goods to the consumer, he passes on the tariff. 

Now, the wholesaler or the retailer may "eat" some of the tariffs. That is, they may lower their profit margin, or find cost savings elsewhere to avoid passing on the full cost of the tariffs. Also, the producer of the product or the exporter may lower the price at which they sell their product to the importer. So while a 100% of the tariff may not be added to the retail price, most of it is.  A recent study published by the New York Federal Reserve found that "a 10 percent increase in the duty rate pushes up import prices by 9.2 percent" (link page 10). So, 92% of the tariff is passed on to the consumer.

One thing people often don't think about or realize is that even if you buy goods made in America, increased tariffs raise the cost of those goods too. The study explains:

Tariffs also affect the prices of goods made in the U.S. This happens in two ways. First, many U.S. producers rely on imported parts and materials, so tariffs raise their cost of production. For example, a tariff on steel makes it more expensive to build a car in the U.S. We refer to this effect as the marginal cost channel. Second, when tariffs make imported goods more expensive, U.S. producers of competing goods face less pressure to keep their own prices down. We refer to this effect as the strategic complementarity channel. We find evidence that U.S. producers increased their prices at the factory gate because of both channels, and the marginal cost effect is the larger of the two.

This same study also found that President Donald Trump's tariff policies were responsible for keeping prices elevated across 67 categories of consumer goods. The research estimated that these items cost 2.9 percentage points more as of February 2026 due to the tariffs. 

The Consumer Price Index measures price changes over time. While there is a definition of inflation that is broader than prices increasing over time, for people who are not academic economists, it is fair to say the CPI measures inflation. There are other indexes that try to do the same, such as the Producer Price Index, but the most relied upon is the CPI. The CPI is produced by the Bureau of Labor Statistics. The BLS collects about 80,000 prices monthly from retail stores, service establishments, car dealers, doctors' offices, divorce lawyers, funeral homes, and almost every price that is part of a legal market transaction. I worked for the Consumer Price Index for several years and was a field officer collecting those prices. The prices are weighted to represent a typical urban market basket of goods. So, while you may purchase only one divorce and one funeral in your lifetime, you probably purchase milk and bread every week. The BLS has a bunch of statisticians and economists who figure out how to calculate the weights of the items in the basket. The U.S. Consumer Price Index (CPI) classifies all expenditure items into 8 major groups, which are further broken down into more than 200 detailed item categories. 

The recent Federal Reserve of New York study found that of the CPI's 200-plus categories of goods and services, the cost of 67 categories of goods was 2.9 percentage points higher as of February, thanks to Trump tariffs. It is a fact: tariffs are causing price increases. 

To read the full report, follow this link. 

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