How Fast Do Tariffs Pass Through into Consumer Prices?

The timing of tariffs' impact on consumer prices varies. Import prices respond almost immediately, rising very close to the increase in tariffs. However, the effect on domestically produced goods takes six to twelve months to materialize as higher costs propagate through the supply chain.

When analyzing the impact of the 2025-26 tariffs on retail consumer prices, researchers found that for every percentage point increase in average tariffs, consumer goods prices rise by about a quarter of a percent after one year. Two-thirds of this effect is due to tariffs directly raising the prices of imported goods, while the remaining third is the indirect consequence of higher domestic producer prices.

These increased producer prices stem from two channels. First, many U.S. producers rely on imported parts and materials, so tariffs raise their production costs. Second, when imported goods become pricier, U.S. producers of competing goods face less incentive to maintain their own prices low. The first channel, the marginal cost effect, is larger than the second.

The passage of tariff-induced price changes into retail prices is roughly 50 percent. If a 10 percent tariff raises the price at the border or factory gate by 10 percent, and the distribution margin remains unchanged, consumer retail prices increase by 5.6 percent. This calculation assumes a good retails for $100, with $50 at the border or factory gate and $50 as the distribution margin.

The total effect on consumer prices can be seen in a scenario where a 10 percent tariff is imposed on all imports. In this case, consumer goods prices would be 2.6 percent higher after twelve months, which is roughly a quarter of the tariff increase. About two-thirds of this impact is direct, due to higher import prices, while the remaining third comes from the indirect effect of U.S.-made goods, primarily driven by the marginal cost channel.