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.

What Can History Tell Us About Tariff Shocks?
Regis Barnichon and Aayush Singh (San Francisco Fed)
January 2026
The change in the average U.S. tariff rate in 2025 was the largest in the modern era. One way to assess the effects of such a large shock on unemployment and inflation is by looking at data from pre-World War II periods with tariff rate changes of a similar magnitude. Analysis shows that previous tariff hikes raised unemployment and reduced both economic activity and inflation. Uncertainty may be a factor behind these effects: A large tariff increase raises uncertainty, which can depress overall demand and lead to lower inflation.

Trade, Tariffs, and Treasuries: The Hidden Cost of Trump’s Protectionism
Rebecca Patterson and Ishaan Thakker (Council on Foreign Relations)
December 2025
The Trump administration’s trade policy—specifically its broad, aggressive use of tariffs—has several direct economic costs and benefits: higher inflation, an effective tax on consumers and businesses, and increased government revenue. Trade policy also has a number of indirect implications, including on the U.S. Treasury market. Treasuries are critically important for the United States, from economic, financial market, and geostrategic lenses, and policymakers need to understand their potential impacts in the next year and beyond. Three avenues are particularly noteworthy: bond supply, bond demand, and the effect of economic growth and inflation trends on the Treasury yield curve. Several trade-related policy ideas could help ensure that the Treasury market remains sound over the longer term.

What is the evidence on the effectiveness of fiscal spending in response to terms-of-trade shocks?
Carlos J. Garcia and Wildo Gonzalez (Alberto Hurtado University)
December 2025
This study uses local projections with nonlinear interactions to estimate the impact of spending on economies suffering from shock terms of trade. Such a shock could be precipitated by several factors, including an escalation in tariffs. The extant evidence suggests that this policy can counteract such shocks, especially in conjunction with free capital flows and a flexible exchange rate. The result contradicts existing literature and would change policy recommendations.

Higher Tariffs Might Have Created Headwinds to Employment Growth in 2025
Johannes Matschke and Mariia Dzholos (Kansas City Fed)
December 2025
Job growth in the United States has slowed considerably this year. We examine the effect of tariffs on job growth and argue that sectors with higher exposure to imports had greater reductions in hiring. Tariffs therefore could have reduced job growth, though there is considerable uncertainty about the effect.

Tariffs and Technological Hegemony
Luca Fornaro (CREi) and Martin Wolf (U. Of St Gallen)
December 2025
The Trump administration’s sweeping tariff measures are intended to increase the competitiveness of US firms – especially in high-tech sectors – and reduce US trade deficits. This column discusses the impact of trade policies on innovation and technological hegemony. The analysis suggests that large and persistent changes in tariffs are likely to affect firms’ innovation decisions and the pattern of technological hegemony. However, countries should be wary of using trade policies to boost innovation by their domestic high-tech firms, since the strategy may easily backfire.

The Incidence of Tariffs: Rates and Reality
Gita Gopinath (Harvard U./NBER) and Brent Neiman (U. of Chicago/NBER)
January 2026
In 2025, statutory tariff rates on U.S. imports rose to levels not seen in over one hundred years. What are the implications for prices? On the one hand, shipping lags, exemptions, and enforcement gaps have kept the actual implemented rates at only half of the statutory rates, moderating the tariffs’ impact. On the other hand, tariff pass-through to U.S. import prices is almost 100 percent, so the United States is bearing a large share of the costs. We study the incidence of the 2018-2019 and 2025 U.S. tariffs and discuss implications for U.S. sourcing, domestic manufacturing costs, and the dollar.

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