Tariff inflation less than expected
But duties have still had impact on prices
By: Daniel de Vise
USA Today
..... Millions of American consumers have been waiting for President Donald Trump's tariff to spark a dramatic rise in consumer prices, pushing the inflation rate into the red zone.
..... They're still waiting.
..... The annual inflation rate reached 3% in September, [2025]
its highest mark in months of aggressive tariff hikes by Trump. Forecasters expected roughly 3% inflation again in November, [2025] with the data due fro release December 18. [2025]
.....
But many Americans expected tariffs to push inflation much higher.
..... "It's a good news story that the economic impact of tariffs is smaller than it seemed like it might be," said Bill Adams, chief economist of America Bank.
..... Back in May, [2025] consumers surveyed bu the University of Michigan predicted prices would rise 6.6% over the next year. [2026]
..... Businesses surveyed by the Federal Reserve bank of Philadelphia in the third quarter of 2025 predicted prices would rise 4.7% in the coming year. [2026]
..... Those dire predictions hinged on tariffs. Tariffs are taxes, and businesses generally pass at least part of their cost to consumers.
..... When Trump unveiled sweeping tariffs in April, [2025] many business leaders braced for a punishing wave of inflation.
..... "The magnitude and speed at which these prices are coming to us is somewhat unprecedented in history," said John David Rainey, chief financial officer of Walmart, speaking to The Wall Street Journal in May. [2025]
.....
Seven months later, it looks like that wave may never break.
..... In a December 10 [2025] news conference, Federal Reserve Chair Jerome Powell suggested America has little to fear from tariff inflation in the months to come.
..... Tariff-related inflation should peak in early 2026, Powell said. And the effect "shouldn't be big," he said. "It should be a couple tenths" of a percentage point, "or even less hat that."
..... In other words, the Feds chair expects tariffs to barely register in consumer prices in 2026.
..... A 3% inflation rate isn't great. The Fed aims for an inflation target of 2%. But neither is it particularly bad. When policymakers speak of an inflation "crisis" economists say, they're usually talking about an annual rate of 5% to 10% or higher.
.....
When it comes to inflation, anything is always possible. Yet, in the closing days of 2025, few observers expect a spike in consumer prices in 2026.
..... Consumers have calmed their worst inflation fears. the typical shopper now expects prices to rise 3.2% over the next year, [2026] according to a November survey by the New York Fed.
.....
Economists expect inflation to drift down to 2.6% in 2026, according to a November [2025] poll by the National Association for Business Economics.
..... Most economists never feared an inflation crisis. In April, [2025] at the peak of the tariff wars, the same NABE survey forecast inflation would reach a comparatively modest 3.4% by the end of 2025.
..... Today, [12/16/2025] most forecasts range lower. Oxford Economics, fro example, projects inflation will ease to 2.2% by the end of 2026, just above the Fed's target.
..... Inflation "is already around its peak," said Grace Zwemmer, associated economist at Oxford Economics.
..... So far, tariffs have added about 0.7 percentage points to the U.S. inflation rate, according to a November [2025] paper published by the National Bureau of Economic Research.
..... Without tariffs, in other words, September's [2025] inflation rate would have been closer to 2% than 3%.
..... "That's a pretty big difference," said Alex Jacquez, chief of policy and advocacy at the left-leaning Groundwork Collaborative nonprofit.
.....
Viewed another way, Trump's tariffs equate to a tax increase of $1,100 per household in 2025, according to the nonpartisan Tax Foundation. They'll cost each household another $1,400 in 2026.
..... The Trump tariffs are the largest tax increase since 1993, according to the Tax Foundation analysis.
..... Many forecasts suggest tariffs will continue to raise prices through the first months of 2026 - but not by much.
..... Powell, the Fed chair, told reporters on December 1o [2025] that he expects tariff inflation to peak "in the first quarter or so" of 2026, with little further impact on the inflation rate.
..... Some other economists concur.
.....
"Inflation from tariffs is still working its way through the supply chain," said Adams of Comerica Bank. "And that process is likely to finish reaching the consumer in the first half of 2026."
..... Yet, Adams predicts the inflation rate "will hold steady around 3%" during those months.
..... Other forecasters warn, however, that the tariff effect is far form over.
..... "Company after company is telling us that they are absorbing most of the price shock form imports still," said Chris Rupkey, chief economists at FWDBONDS. "But 2026 could be a different story."
..... Some of the dire predictions about tariffs and inflation assumed American consumers would bear the brunt of those taxes.
..... That didn't happen. Only about 20% of Trump's tariffs "passed through" to consumers, according to the study from the national Bureau of Economic Research.
.....
As imported products passed from their country of origin to American retailers to consumers, their impact softened at every stop.
..... Exporters accepted lower prices for products they sold to American manufacturers and merchants, Adams said. China's economy weakened, he said, pushing down prices for Chinese exports.
..... American retailers, for their part, "have been either unable or unwilling to pas on the full costs of tariffs to consumers," partly from concern about losing their business, said Jacquez of Groundwork Collaborative. Some firms sought cheaper versions of the same products for countries with lower tariffs.
..... Lastly, trump rolled back some of his own tariffs, blunting their impact on consumers.
..... Between carve-outs, trade deals and other exclusions, roughly hall of all U.S. imports now enter the country tariff-free, Politico reports.