The New York Fed puts the rise in consumer goods prices down to tariffs

The Federal Reserve Bank of New York has published a study concluding that tariff policy pushed consumer goods prices up, with one account reporting the finding as tariffs accounting for 100 percent of consumer goods inflation³. Another report of the same study puts the increase at 2.9 percent by February¹. A third says the study found that for every one-point rise in the average tariff rate, consumer goods prices climb by about a quarter, in a sentence the excerpt cuts off².

The study also sets out the timing: a tariff’s full effect on consumer prices takes about a year to appear, and the tariff contribution to the consumer goods price level peaks and then retreats¹. One account frames the result as the New York Fed contradicting President Donald Trump, on the grounds that many prices would have fallen without the tariffs⁴.

Voters have reached the same conclusion about incidence. A poll published this week found a majority of Americans say US consumers ultimately pay the cost of tariffs on imported goods^5,6.

Why it matters to investors

The split between tariff-driven and demand-driven inflation is the one the rate debate turns on. In the same report that carries the study, Federal Reserve Governor Christopher Waller is quoted saying that he anticipates additional hikes, in a quotation the excerpt cuts off⁴.

The second channel is cash. The US government has started to pay billions of dollars in tariff refunds to companies that passed the tariffs along to consumers^7,8. That has set off a fight over who the money belongs to: class action lawsuits over tariff refunds are targeting Walmart, Puma and others, and the complaints argue that in economic reality the consumer paid the illegal tariff⁹.

What to watch

Watch whether the peak-and-retreat path in the study shows up in the published inflation data, because the study’s own timing says the full effect arrives about a year after the tariff¹.

Watch the refund claims. The suits ask courts to decide whether a company that collected a tariff from shoppers can keep the refund, which the complaints say would unfairly enrich Walmart at shoppers’ expense⁹.

And watch the politics of the finding. The study comes from a Reserve Bank inside the Federal Reserve System, and it is being read as a direct contradiction of the administration’s account of tariffs and prices^3,4.