Shoppers carry Macy’s and Nordstrom bags at Broadway Plaza on Monday, December 16, 2024 in Walnut Creek, California, USA. The Bureau of Economic Analysis is scheduled to release personal spending statistics on December 20th.
David Paul Morris | Bloomberg | Getty Images
The impact has been muted so far this year, but tariffs are expected to catch up with the prices consumers pay in time for the holiday season.
The tariffs that President Donald Trump launched in April on a number of items and individual countries coincide with general inflation hovering between 2.5% and 3% this year.
Economists do not expect common measures such as the Consumer Price Index and the Personal Consumption Price Index to rise significantly, but they do expect the tariffs to continue to raise these measures at a time when they would be lower without them.
“There has been some question in recent months about whether tariffs led to higher consumer inflation,” Bank of America economist Aditya Bhave said in a note. “We think there is no debate. Tariffs are driving up consumer prices.”
The impact of the tariffs has so far been contained as companies built up inventories ahead of the tariffs and absorbed some of the impact through compressed profit margins.
But Bank of America expects the tariffs will add about 0.5 percentage point to the core PCE measure that the Federal Reserve uses to assess inflation. With the tariffs in place, BofA estimates inflation would be 2.9% in September, compared to 2.4% without the tariffs. The numbers are similar to those cited by Fed Chairman Jerome Powell on Wednesday. Annual core PCE was 2.9% in August.
These percentage differences are important for the Fed, which is trying to keep core inflation, which excludes food and energy, at 2%, a level it has kept above since March 2021. Two Fed officials, Kansas City District President Jeffrey Schmidt and Dallas District President Laurie Logan, said Friday they disagreed with their colleagues’ decision Wednesday to lower the central bank’s key interest rate.
It’s also important for consumers. Beebe estimates that shoppers pay about 50-70% of the total tariff, with businesses paying the rest.
Impact at the cash register
In the real world, that means higher prices for things like coffee, furniture and, more recently, clothing, which rose 0.7% in September, according to the Bureau of Labor Statistics. Although these are not major components of the price index, they are goods that consumers frequently purchase and can create a perception of inflation, which can create a self-reinforcing cycle that drives prices up.
“Inflation in a particular product can have a significant impact on consumer confidence, even if that product represents a small portion of the CPI basket,” TD Cowen analysts said in a note. Rising prices for items such as eggs “create a constant, tangible feedback loop in the grocery store each week. Such items shape perceptions more than statistical significance would suggest.”
The company noted that there could be more of that this holiday season, as nearly all artificial Christmas trees are imported from China, which faces higher costs from President Trump’s tariffs.
“Artificial Christmas trees are not unique, but they are a clear example of how high-tariff seasonal goods can shape consumer perceptions of inflation,” Cowen said.
Shoppers would have spent an additional $40.6 billion had the tariffs been in place during the 2024 holiday season, according to LendingTree estimates using data from multiple government and private sources.
LendingTree’s Budget Lab further estimates that approximately 70.5% of the new tariffs were passed on to consumers in June 2025.
“That means many more Americans would have had to rely on credit cards or personal loans to cover the cost of purchasing gifts,” said Matt Schultz, the company’s chief consumer finance analyst. “That’s the unfortunate reality that many people have faced.”
Using similar calculations, LendingTree said the tariff cost would be $132 per shopper.
