Fed researchers see a 'full pass-through' of Trump's tariff costs to consumers, adding almost a full percentage point to inflation | Fortune

"Tariffs are now subject to a "full pass-through" from collection-driven prices to consumer-facing inflation, according to a study by researchers at the Federal Reserve Bank of Dallas, published last week. That means companies are no longer covering the tariff cost by paying duties at the border, but have now fully transferred those costs to the public in the form of higher prices for goods and services."

"The authors found tariffs have already had a measurable impact on inflation, specifically core inflation, which excludes volatile food and energy prices. Year-over-year core inflation hit 3.2% in March, the highest level recorded since 2023, a surge largely attributable to tariff costs, according to the Fed researchers. They estimated core inflation would have been 0.80 percentage points lower in March absent tariffs, coming in at a much more manageable 2.3%."

"Instead of analyzing tariff rates as announced by the Trump administration, the authors focused on so-called realized rates, or the amount of duties that have actually been collected on goods and services coming into the country. Earlier projections of tariff costs were primarily forecasts based on political announcements and fact sheets, which do not always neatly lay the path for how consumers will be impacted."

Tariff costs have shifted from foreign trade partners to U.S. corporations and now to average shoppers. Companies are no longer absorbing most tariff expenses and instead transfer them to the public through higher prices for goods and services. A Federal Reserve Bank of Dallas study finds tariffs are subject to full pass-through from collection-driven prices to consumer-facing inflation. The study estimates tariffs have already increased core inflation, excluding volatile food and energy. Core inflation reached 3.2% year over year in March, and the estimate suggests it would have been 0.80 percentage points lower without tariffs, at about 2.3%. The analysis uses realized tariff rates based on duties actually collected rather than announced rates.

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