The Federal Reserve’s latest research, published in its Finance and Economics Discussion Series, estimates that U.S. tariffs imposed in 2025 increase consumer prices by 1 to 2 percent on average, with a price pass‑through rate of 15 to 20 percent. The study links higher tariffs to a 4 percent decline in household spending, driven by consumers reallocating purchases toward essential goods and trimming discretionary spending, especially among middle‑income families that expressed tariff concerns. Lower‑income households bear a heavier welfare burden, experiencing a more regressive price pass‑through. The paper uses transaction‑level data linked to tariff exposure and a tariff sentiment survey to reach these conclusions. Findings highlight the broader impact of trade policy on household consumption patterns.
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