For much of 2025, American businesses absorbed the cost of tariffs quietly, drawing down stockpiles of pre-tariff inventory and accepting thinner margins rather than pass the shock to shoppers. That buffer has now largely run out, and the bills are arriving at the checkout counter.
The Numbers Are Clear
According to research published by the Federal Reserve Bank of Minneapolis, core PCE (Personal Consumption Expenditures) inflation stood at 3.1% year-over-year through January 2026. A separate Fed note found that tariffs implemented through late 2025 raised core goods PCE prices by 3.1% through February 2026, accounting for virtually the entire excess in goods inflation above pre-pandemic trends.
The broader consumer price index tells a similar story. Research from Purdue University’s Center for Commercial Agriculture found that the CPI is roughly 0.7 percentage points higher than it would have been without the tariffs. In plain terms: if the November 2026 inflation reading was 2.7%, it would have hit the Fed’s 2% target without tariff-related price pressures.
Stanford University’s Institute for Economic Policy Research (SIEPR) noted that more than 50% of tariff costs are now passing through to consumers – a meaningful burden on households, even if below the near-100% pass-through seen under the 2018–2019 tariffs on China.
Why the Lag?
Businesses don’t raise prices overnight. Companies reprice based on when their inventories arrived, and many were cautious about being perceived as opportunistic price-gougers. As Goldman Sachs researchers noted, the current tariff regime is projected to raise inflation by roughly 1 percentage point between the second half of 2025 and the first half of 2026 relative to a no-tariff baseline.
Morningstar forecasts US inflation averaging 2.7% for 2026, with durable goods prices rising a cumulative 4.5% over 2025-2027 and non-durables rising 5.6% – less severe than the 2021-2023 goods price surge, but still a meaningful inflationary impulse.
Who Is Feeling It Most
The impact is not evenly distributed. Deloitte’s March 2026 Economics Insider analysis found that low- and middle-income households are bearing the brunt of tariff-related price increases, while higher-income consumers continue spending relatively freely. The Federal Reserve’s Beige Book described consumer spending as “increasingly bifurcated across income groups,” with middle-income shoppers “squeezing more life out of every dollar before deciding to spend it.”
What Comes Next
Purdue’s economists expect inflation to moderate toward 2.5% by early 2027 as the tariff shock fades and oil prices ease. But that assumes the Middle East conflict does not escalate further – a significant caveat given current energy market conditions.
For consumers, the practical implication is straightforward: price pressures on imported goods —-electronics, appliances, apparel, and some food categories – are likely to persist through the remainder of 2026. Building a household budget that accounts for continued above-trend goods inflation is not pessimism; it is prudent planning.
Sources: Federal Reserve, Federal Reserve Bank of Minneapolis, Purdue University, Stanford SIEPR, Goldman Sachs, Morningstar, Deloitte
