Finance and Economics Discussion Series (FEDS)
June 2026
Paying More and Buying Less: 2025 Tariffs and U.S. Household Spending
Sinem Hacıoğlu Hoke and Leo Feler
Abstract:
This paper estimates the effects of the 2025 U.S. tariffs on household spending using transaction-level data linked to tariff exposure and a tariff sentiment survey. Comparing high versus low tariff-exposed categories, we find 15 to 20 percent price pass-through. At the mean increase in tariff exposure, prices rise by 1 to 2 percent while spending falls by roughly 4 percent. Survey evidence linking stated intentions to revealed behavior identifies a mechanism for the large spending response: reallocation toward essentials and trade-down within categories, concentrated among middle-income households with discretionary slack who express tariff concerns. Low-income households bear a disproportionate welfare burden through regressive pass-through.
Keywords: Tariffs, Pass through, Prices, Household Spending, Welfare, Uncertainty
DOI: https://doi.org/10.17016/FEDS.2026.035
PDF: Full Paper
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