Board of Governors of the Federal Reserve System

March 05, 2026

The Slow Climb: How Tariffs Gradually Raised Retail Prices in 2025

Sinem Hacıoğlu-Hoke, Sarojini Malladi, and Leo Feler¹

The speed and extent to which tariffs built pressure on consumer prices in 2025 remains an ongoing and important debate. This note examines tariff-related retail price changes using a detailed item-level retail spending dataset combined with information on the countries where products are produced. We find that (1) price pressures developed gradually in 2025 rather than showing up as a one-time price spike, (2) tariff effects have been greatest for goods imported from China with 8.5% year-over-year price increase by December 2025, (3) tariff pass-through to consumers between April 2025 and December 2025 has been at least 30% for goods imported from China.

Our approach to looking at prices based on country of origin is in the spirit of the recent analysis by Cavallo et al. (2025), though our methodology offers a key advantage.² Specifically, based on data from a representative panel of up to 200,000 US households, we use prices observed from retail transactions weighted by quantities purchased to construct a headline price index. This quantity-weighted approach allows us to establish the reliability of our aggregate index by comparing it with the US Bureau of Economic Analysis' Personal Consumption Expenditure (PCE) Price Index. Our headline index closely matches the official PCE deflator for food and correlates strongly with other inflation measures, providing validation for our methodological approach. We then disaggregate our price index to measure inflation for a set of products based on their country of origin.

The data for prices, quantities, and country of origin

There are various ways to calculate price indices, and doing so requires information on product prices and ideally on purchased quantities. To get retail prices and quantities purchased, we use item-level retail purchase data from up to 200,000 representative US households for the period of January 2018 to December 2025 provided by Numerator, a consumer research company.³ The data include information on households' purchases collected via a mobile app.⁴

Table 1 provides an overview of expenditure and product shares across various sectors tracked in the data. Groceries dominate, accounting for 44% of expenditures and 45% of products purchased. Health & Beauty ranks second at around 9% for both expenditure and product share. Some sectors show higher expenditure shares relative to their product shares, such as Home & Garden and Electronics, reflecting higher-value items like furniture and appliances. Conversely, Apparel represents around 5% of products but around 3% of expenditures. Between January to December 2025, the average panelist shared transaction data totaling $17,000 in spend and the average self-reported annual household income was approximately $100,000, suggesting the spend captured in the data represents approximately 17% of household income. This figure is comparable to data from the US Bureau of Labor Statistics' Consumer Expenditure Survey.^{5, 6}

Table 1: Expenditure and Product Shares by Sector between January 2025 and December 2025

Although the data provide detailed insight into US consumers' daily shopping behavior, it covers only about 20% of the consumption basket captured in the PCE and CPI. Major spending categories like housing, travel, motor vehicles, entertainment, and healthcare - which constitute significant portions of household spending - are not tracked. Recent analyses show that weights consumers assign to price changes depend on the frequency of purchase rather than expenditure share, and households rely heavily on grocery bundle prices when forming aggregate inflation expectations (see D'Acunto et al. (2021), Weber et al. (2022)). Given this, as this note demonstrates, the Numerator data provide a reliable signal for retail price changes experienced by US consumers.

Numerator data contain product descriptions but do not contain information on product origins. To identify source countries, we use Label Insight, a dataset of consumer packaged goods sold in the US that includes detailed product information such as country of origin linked to Universal Product Codes (UPCs). By combining Numerator and Label Insight through matching UPCs, we create a dataset of approximately 27,000 products, primarily covering health and beauty products and groceries, with some limited coverage of furniture, electronics, and various household items.⁷ In Figure 1, we show the share of various sectors by country of origin captured in matched Numerator and Label Insight data for sectors with 1% share in at least one country. Throughout our analysis, we focus on products made in the US, in the US's main trading partners Canada, Mexico, and China, and we bundle all other source countries under 'Others'.⁸

Figure 1. Share of Sectors by Country of Origin

The Fisher Price Index

With information on both quantities and prices of products purchased by a representative household panel, we construct a monthly Fisher Price Index (FPI) starting in January 2018, the first available month in the dataset. The FPI, although computationally more complex than other counterparts, has the advantage of accounting for both base and current period quantity weights.⁹ For a given period $$t$$ compared to the base period $$0$$, the FPI, $$F_t$$, is defined as:

$$$$ F_t = \sqrt{L_t \cdot P_t} = \sqrt{\frac{\sum_{k \in \Omega} p_{kt} q_{k0}}{\sum_{k \in \Omega} p_{k0} q_{k0}} \cdot \frac{\sum_{k \in \Omega} p_{kt} q_{kt}}{\sum_{k \in \Omega} p_{k0} q_{kt}}} $$$$

where $$L_t$$ is the Laspeyres index, $$P_t$$ is the Paasche index, $$p_{kt}$$ and $$q_{kt}$$ are the price and quantity of product $$k$$ in period $$t$$, and $$\Omega$$ is the set of all products. The Laspeyres index $$L_t = \frac{\sum_{k \in \Omega} p_{kt} q_{k0}}{\sum_{k \in \Omega} p_{k0} q_{k0}}$$ uses base period quantities as weights, while the Paasche index $$P_t = \frac{\sum_{k \in \Omega} p_{kt} q_{kt}}{\sum_{k \in \Omega} p_{k0} q_{kt}}$$ uses comparison period quantities. The FPI is the geometric mean of the Laspeyres and Paasche indices. The results can be interpreted as a percentage relative to the base period. The Fisher Price Index we calculate using the transaction level data is comparable to the construction of the PCE inflation index, the Federal Reserve's preferred measure of inflation, which is also a Fisher Price Index using expenditure weights. We calculate country-specific Fisher price indices using the formula in Equation 1 but focusing on the prices and quantities of products imported from specific countries.

Figure 2 demonstrates the similarity between the Numerator FPI and the PCE deflator for food from 2018 to 2025. Panel A shows both indices remain relatively stable from 2018 until early 2020, followed by a sharp increase starting in 2021, reflecting inflationary pressures from both demand and supply factors (see Shapiro (2024) and Braun et al. (2024)). The FPI tracks the PCE price index closely throughout with minor divergences. By mid-2025, both indices reach similar levels and begin accelerating in the final months, with the FPI reaching over 130, indicating a cumulative price increase of around 30% since January 2018.

Figure 2. Numerator Fisher Price Index constructed using product quantities and prices versus the PCE for food

Panel B, showing year-over-year percent changes, further emphasizes the close alignment between the two measures. Both indices capture the significant price acceleration in 2021 and 2022, peaking at around 13% year-over-year, before moderating in subsequent years. The Numerator FPI is consistent with the BEA's PCE index for food in showing higher year-over-year inflation in 2025, compared to the inflation experience in 2024. Reassuringly, the correlation coefficients reported in Table 2 indicate that although PCE food inflation is the most correlated with the Numerator FPI, other measures of inflation show high correlation as well.¹⁰

Table 2: Correlation between inflation measures and Numerator FPI

Tariff effects on consumer prices in 2025

There is preliminary evidence of the price effects of tariffs on imported as well as domestically produced goods, see Baslandze et al. (2025); Cavallo et al. (2025); Dvorkin et al. (2025); Minton and Somale (2025). We contribute to this effort by tracking potential tariff-induced price increases in 2025 in Figure 3.

Figure 3. Price indices by country of origin

Panel A of Figure 3 shows that indices for all countries except China remain relatively stable until 2021, when they all start increasing significantly. The US imposed several rounds of tariffs on imports from China beginning in 2018, and we see the series for China diverge earlier.¹¹ Previous research (Amiti et al., 2019; Flaaen et al., 2020; Cavallo et al., 2021) and our evidence confirm these tariffs increased Chinese goods prices. By 2025, products from all origins experienced 28-38% cumulative inflation.

Panel B displays year-over-year price changes. Four key observations emerge. First, Chinese goods show high yearly inflation in 2019, following the tariffs imposed beginning in 2018. Second, all prices increase markedly during the post-pandemic inflation period regardless of origin. Third, goods produced in the US experience higher price increases than imported goods during 2022-2023. Fourth, consumer price inflation for Chinese imported goods has diverged by more in early-2025, coinciding with the tariffs announced in 2025, followed by the prices of goods from 'Other' countries starting to increase towards the end of the year.

Now let's focus more closely on 2025. Figure 4 shows the 12-month percent changes of the source-country price indices for January through December 2025. Until April, the year-over-year inflation on the retail prices for imported goods is approximately zero. Starting in April, retail prices for Chinese imported goods gradually increase and are almost 8.5% higher in December than a year ago. On the other hand, price increases for US products are on average below 2% and price changes for Canadian products are muted in 2025. Prices of goods imported in the 'Others' category rise gradually following the April tariff announcement and reach over 5% year-over-year by December.

Figure 4. Price changes in 2025 by country of origin

The higher December prices for Chinese imported goods of over 8% year-over-year would imply a conservative estimate of the tariff pass-through of at least 28-32%. We calculate this conservative pass-through rate by considering that the statutory effective tariff rate (ETR) increase due to 2025 tariffs on China is around 30% and the realized ETR is around 26% as estimated by Cavallo et al. (2025).¹² This observation is within the range of the pass-through findings in the recent work by Dvorkin et al. (2025) that find partial tariff pass-through of around 35% to PCE prices and by Cavallo et al. (2025) that estimates a 20% pass-through.¹³

Figure 5 provides additional evidence on the stronger pass-through of tariffs on the prices of goods imported from China. Panel A shows the event study results that gauge the changes in Chinese imported goods prices after the tariff announcements in April 2025. Retail prices do not significantly react immediately after tariff announcements, roughly until August.¹⁴ Goods prices for imports from Canada, Mexico, and all other countries in Panel B start increasing from June onward, albeit to a much smaller extent than the price increases observed for Chinese goods. As of December 2025, the price increases of goods imported from China appear to be around double the price increases of goods imported from all other countries.

Figure 5. Event study results for price changes of goods imported from China and Canada, Mexico and Others

Conclusion

This note analyzes how consumer prices in the US responded to tariff announcements in 2025. While our product coverage is limited and cannot account for the complete basket of household purchases, the evidence we find is compelling. Prices of everyday household items began increasing a few months after tariffs were implemented. As of December 2025, tariffs do not appear as a one-time price spike, but rather as a pattern of gradual and slow adjustments to retail prices that US consumers see on store shelves.

Why hasn't the impact been larger? Retailers are navigating a tricky environment. Consumers are more price-sensitive and financially stretched than during the pandemic recovery period. Although price increases seem to be reflected in import costs (Hinz et al., 2026), many retailers have so far absorbed costs consistent with the pattern observed during the 2018-2019 tariffs (Cavallo et al., 2021). There has also been significant uncertainty about tariff persistence throughout 2025, which likely delayed pricing decisions that cannot be easily reversed. Moreover, many producers and retailers first worked through excess inventories accumulated before tariffs took effect. Realized tariffs have also been lower than announced rates due to exemptions (Gopinath and Neiman, 2026). With the evidence at hand so far, considerable uncertainty remains about the potential for additional price adjustments and the ultimate degree of tariff pass-through. Our analysis nevertheless indicates that consumers are in fact paying higher retail prices because of tariffs.

References

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