New York Fed study: Tariffs added 2.9 points to goods inflation, prices would have fallen without them

Key points

• The New York Fed study estimates that tariffs increased consumer goods inflation by 2.9 percentage points by February 2026.
• Without tariffs, prices for the 67 analyzed goods categories would have fallen by approximately 1% during the same period.
• About 26% of the tariff increase was passed through to consumer prices, with the full effect taking up to a year to materialize.
• The price impact peaked in February 2026 but is forecast to ease to around 2% by August 2026 before rising again due to new Canadian tariffs.
• The White House maintains that foreign exporters, not U.S. consumers, bear the ultimate cost of the tariffs.

Background

This analysis follows a period of persistent inflation above the Federal Reserve's 2% target, with core PCE rising to 3.3% in July 2026. Earlier concerns about Fed Chair Kevin Warsh's stance on inflation and potential rate hikes were influenced by ongoing tariff pressures. The Supreme Court's February 2026 ruling struck down many initial tariffs, leading to a temporary easing of price pressures, but the administration has since implemented alternative levies, including a 10% surcharge on many imports and new tariffs on Canadian goods.

How outlets are covering it

The New York Fed researchers, Mary Amiti, Sebastian Heise, and David Weinstein, emphasize that tariffs have a larger and more drawn-out impact on consumer prices than direct levies alone suggest, with indirect effects on domestic producers taking six to twelve months to fully materialize. CNBC highlights the study as the clearest evidence yet of the policy's impact on consumer wallets, noting that prices would have declined without the tariffs. The Washington Post frames the findings as a disruption of a slight downward trajectory in inflation. In contrast, the White House, via spokeswoman Taylor Rogers, argues that the cost of tariffs is ultimately borne by foreign exporters, contradicting the Fed's finding that 26% of tariff increases were passed through to consumers. Axios notes the slow pass-through but provides limited additional detail in the provided text.

Why it matters

This study provides concrete evidence that tariffs have significantly raised consumer prices, contradicting administration claims that foreign exporters bear the cost. The findings suggest that while the inflationary impact may fade, the higher price level will persist, affecting household budgets and potentially influencing Federal Reserve monetary policy decisions. The delayed nature of indirect effects means that future tariff changes, such as those on Canadian autos, could continue to influence inflation into 2027.

What to watch

The New York Fed forecasts that the tariff effect on the price level will ease to about 2% by August 2026 but rise again due to new tariffs on Canadian goods and an announced increase on Canadian autos in January 2027. Consumers are expected to pay elevated prices into 2027 as indirect effects from domestic supply chains continue to adjust. The administration is expected to push forward with alternative tariff measures to maintain levies, potentially influencing future inflation trends.