Would prices have fallen without tariffs this past year? New York Fed research says yes for many consumer goods

Prices for some consumer goods would have fallen between April 2025 and February 2026 had President Trump not introduced or expanded tariffs during that time, according to a new study from the Federal Reserve Bank of New York. Instead, Trump’s “Liberation Day” tariffs contributed an estimated 2.9 percentage points to annual inflation across 67 categories of goods.

The study’s findings help isolate the impact of trade policy on goods inflation, rather than examining inflation across the broader economy. Here’s what to know about the impact of tariffs on consumer prices and whether pressures could persist into 2027.

Study shows tariffs pushed consumer prices higher in 2025 and 2026

On April 2, 2025, Trump announced broad tariffs on U.S. imports from virtually all countries. The policy established a baseline 10% duty on many imports beginning on April 5, with higher country-specific rates scheduled afterward, subject to exemptions and subsequent changes.

On February 20, 2026, the Supreme Court invalidated Trump’s tariff policy, which he had implemented through the International Emergency Economic Powers Act (IEEPA). While the high court specifically ruled that IEEPA does not give the president power to impose tariffs, more than 10 months of tariffs prior to the ruling had already had a significant impact on inflation.

The analysis by the New York Fed compared price changes among 67 categories of non-oil consumer goods with different exposure to tariffs. Researchers then estimated what annual goods inflation would have been without those duties. The model indicated that, in the absence of tariffs, prices would have declined modestly – by about 1% – over the preceding year instead of increasing as observed.

The 2.9-percentage-point estimate measures tariffs’ contribution to annual price growth across the sampled goods; it does not mean that every product became 2.9% more expensive. Specifically, the analysis covered select non-oil consumer goods, excluding services. The study also held wages, exchange rates, demand and monetary policy constant, even though tariffs might have affected those variables as well.

How do tariffs show up in consumer prices?

A tariff is a tax on imported goods, generally paid by the importer. While some importers are able to negotiate a lower price with their overseas suppliers, the study by the New York Fed found that nearly 90% of Trump’s second-term tariffs were reflected in higher U.S. import prices. Importers may absorb some of this added expense or charge more to wholesalers, retailers and customers, so the tariff rate itself doesn’t automatically translate into an equal price increase at the store.

Researchers at the New York Fed estimated that each percentage-point increase in the tariff rate in 2025–2026 raised consumer goods prices by roughly 0.25% after a year. They attributed the impact to both direct and indirect effects. More expensive imported products were directly responsible for approximately two-thirds of the jump. Meanwhile, indirect costs from goods manufactured domestically – either by companies using more expensive imported materials or by producers raising their own prices to compete with costlier imports – constituted the remaining third.

The study also measured the time frame for these tariff-driven price increases reaching consumers. Researchers concluded that roughly half of the 2025–2026 tariffs’ direct effects on retail prices appeared within three months and the rest within about six months. Comparatively, the tariffs’ indirect effects on prices of U.S.-made goods took six to 12 months to move through the supply chain.

Will we see higher prices continue into 2027?

The New York Fed study suggests that the effects of Trump’s second-term tariffs may leave goods prices elevated, even as their contribution to annual inflation declines. However, while a lower inflation rate means prices are rising less quickly, it doesn’t necessarily mean prices will return to earlier levels.

It’s estimated that the tariff-related increase in prices of consumer goods peaked near 3% in February 2026 and eased to about 2% by August 2026. Much of that decline is attributed to lower tariff rates following the Supreme Court ruling against tariffs imposed under IEEPA. That ruling did not remove every tariff, however, as Trump only days later invoked Section 122 of the Trade Act of 1974 to impose a temporary 10% “global tariff.”When the Section 122 tariffs expired on July 24, 2026, they were replaced with tariffs of 10% to 12.5% on 60 countries, invoked under Section 301 of the same law.

This ongoing tariff activity may help explain why tariff-related increases haven’t completely disappeared. For households, lasting price increases continue to strain budgets, while for investors, tariff exposure can affect corporate margins, pricing decisions and consumer demand. Businesses reliant on imported inputs may face different pressures than domestic service companies.

While the study does not predict Fed policy, inflation trends can influence policy expectations – which in turn can affect cash yields, stock valuations and bond prices. Investors may find it useful to assess how persistent prices and policy uncertainty fit their broader investment horizon, diversification and spending needs.

The bottom line

The New York Fed’s analysis suggests that tariffs were an important factor in price increases for certain consumer goods in 2025 and 2026. Effects reached beyond imports and could remain visible through 2027, even if tariff-driven inflation cools. For consumers, distinguishing slower increases from actual declines can help keep prices in perspective. For investors, consider monitoring inflation, company cost pressures and interest rate expectations without basing your portfolio decisions on a single study or data point.

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