Tariff Pass-through into Retail Prices: Measurement, Replacement, and Shrink-flation
Liang Bai (King’s College London), et al.
December 2025
To what extent do import tariffs pass-through into retail prices? Existing estimates for the U.S.-China trade war present a puzzle: pass-through into U.S. border prices was complete with seemingly no effect on retail prices. We combine barcode country-of-origin data with retail scanner data to address this apparent discrepancy in the context of consumer goods. Within barcodes, tariff pass-through into retail prices is 14%, yet pass-through into aggregated price per unit weight is 44%. This discrepancy is attributable to product replacement bias: pass-through occurs predominantly via product turn-over towards barcodes with smaller package size, even within narrow firm-product combinations. Confidence intervals overlap considerably with existing estimates of the foreign cost share of U.S. retail imports, which we validate, such that we cannot reject full tariff pass-through into retail prices.