New research shows that the cost of many consumer goods would have declined last year if not for U.S. tariffs.
The paper from the Federal Reserve Bank of New York says the cost of 67 categories of goods was 2.9 percentage points higher as of February because of the tariffs. The paper was released earlier this week by the central bank and flagged in a Thursday (Oct. 8) CNBC report.
The researchers also found that prices for the products in question would have dipped by nearly 1% without the tariffs.
“Importantly, tariffs also raise the prices of goods that are not directly taxed: goods made in the U.S. account for about a third of the total effect,” the researchers wrote. “This indirect effect takes longer to materialize than the direct effect on imported goods, so the full effect of a tariff takes about a year to appear.”
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While annual price growth in the 67 categories hit its peak at the beginning of this year, the researchers expect that consumers will continue to pay higher prices in 2027 due to tariffs.
The Supreme Court ruled in February that many of the White House tariffs were illegal, leading the government to refund billions of dollars to retailers. As the summer wound down, companies including Walmart, Tractor Supply, e.l.f. Beauty and Burlington announced they would use the tariff refunds to lower prices.
“It feels like the right thing to do for our customers,” Burlington CEO Michael O’Sullivan said during an earnings call in late August.
“Over the last few years, many households, especially moderate- to lower-income families, have struggled with the higher cost of living — higher prices on essentials like groceries, rent, gas prices, etc. So our goal is to use the tariff refunds to give our customers a break.”
Meanwhile, additional Fed data this week found that American consumers are coming into the closing months of 2026 less worried about losing their jobs, but more concerned about prices and less confident about the future of their household finances.
“For retailers, data points should factor into decisions on pricing and mix heading into the holiday season,” PYMNTS wrote.
“Consumers are expecting to spend more dollars, but their assessment of whether it is a good time to make a large purchase has weakened. Higher nominal spending, in other words, does not automatically translate into stronger appetite for discretionary purchases.”
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