10/08/2026
Interesting paper from the Federal Reserve Bank of New York relating to the transmission of tariffs from importers to consumer prices.
"The Total Effect: Higher Consumer Prices
To illustrate how the three results combine, we consider a scenario in which a 10 percent tariff is imposed on all imports. We estimate that in this case consumer goods prices would be 2.6 percent higher after twelve months, or about a quarter of the tariff increase. About two-thirds of this effect is direct, driven by higher prices of imported consumer goods. The remaining third is the indirect effect from U.S.-made goods, most of it from the marginal cost channel.
This consumer price increase does not arrive all at once. The direct effect of higher import prices comes through quickly: about half is in place after three months and all of it by six months, as retailers take a few months to pass on higher costs. In contrast, the indirect tariff effects from higher domestic producer prices take longer to appear. The size of the indirect effect on retail prices more than doubles between six and twelve months as U.S. producers raise their prices. The full effect on consumer prices is reached only after about a year."
A look at how much of U.S. tariffs reach consumers and how quickly, tracing tariffs through import, domestic producer, and retail prices.
