Before the Supreme Court ruled President Trump’s International Emergency Economic Powers Act (IEEPA) tariffs unlawful, the tariffs imposed throughout 2025 had raised overall retail prices of imported goods by about 7 percentage points relative to the pre-tariff trend. While modest compared to some of the statutory tariffTariffs are taxes imposed by one country on goods imported from another country. Tariffs are trade barriers that raise prices, reduce available quantities of goods and services for US businesses and consumers, and create an economic burden on foreign exporters. rate increases, the retail price effects likely would have grown had the IEEPA tariffs remained in place. The Court’s decision eliminates nearly three-quarters of the tariffs Trump imposed in 2025, but what happens to retail prices next will depend on the extent to which those unlawful tariffs are replaced with new levies.
Tariffs can raise prices for consumers in two ways. One is through the direct impact of the tariff: the increase in the import price itself. Academic studies showed that during Trump’s first trade war in 2018, it was the importer, and not the exporting foreign firm, that bore almost all of the tariff. That is, the import price rose by almost exactly the amount of the tariff applied.
In most cases, the importer is going to be a business, and will therefore have some latitude when choosing how much of the increase in the import price to directly pass on to the final consumer. For this reason, pass-through of the tariff to the retail price may be less than the actual tariff rate applied if the firm chooses to absorb some of the increase in the form of lower profits and investment. Note, however, that this does not imply that consumers would be shielded from the costs of the tariffs. The burden would be shared by shareholders, business owners, and their workers (which includes consumers).
The second way tariffs can raise prices for consumers is indirect, and likely smaller than the tariff increase: firms and consumers may switch to domestically available substitutes. Consider the current tariffs on steel and aluminum, which are set at 50 percent. These high tariffs make domestic steel and aluminum relatively more attractive to manufacturing firms, as those prices would be comparatively cheaper than the tariff-burdened import price.
Due to the protectionist tariffs, domestic steel and aluminum smelters will also be incentivized to raise their prices, while keeping prices just below the import price to remain competitive. Indeed, both imported and domestic steel and aluminum prices increased after President Trump imposed tariffs in his first term.
To assess the impacts of the tariffs on retail prices of both domestic and imported goods, a team of Harvard economists has been tracking retail prices using real-time barcode data. The latest data through February 10 show that tariffs have raised retail prices of imported goods on average by 6.8 percentage points, and for domestic goods by 4.8 percentage points. Several goods have experienced notably large price increases, including clothing (17.5 percentage points), building materials (10.5 percentage points), coffee and tea (10.0 percentage points), fish and seafood (7.9 percentage points), household textiles (8.0 percentage points), and furniture (7.4 percentage points).
In many cases, prices for imported goods have risen much faster than prices for domestic alternatives, indicating that tariffs themselves are driving the price increase rather than other factors. For example, imported clothing prices have risen by more than 20 percentage points, while prices for domestic clothing have only risen by about 8 percentage points, all relative to the pre-tariff trend.
The economists do not report how much of the tariff passed through to the retail price over this period, but it should be noted that their numbers here imply that the pass-through to the retail price was substantially smaller than pass-through to the import price. Recent evidence implies about 94 percent of the tariffs passed through to the import price.
While these overall retail price effects are not small, they are more modest compared to the overall tariff rate increases we have seen. There are a few reasons why this is the case. One is the general uncertainty regarding the overall tariff regime. With President Trump frequently changing tariff rates in both directions over the course of 2025, along with the possibility that the Supreme Court would strike down the IEEPA tariffs, many firms adopted a “wait-and-see” approach before making changes in their overall pricing strategy. This is consistent with the survey evidence from last year, which generally found that US businesses in the short run were more likely to absorb some of the tariffs.
Another reason for only small price increases over this period is that some firms operate on a contract basis and had already locked in their prices for the year. For example, farm equipment is typically leased on a yearly basis so that these suppliers can smooth out their demand around crop cycles or insulate themselves from bad weather events. Finally, some firms have preexisting inventory from which they were drawing down, as imports were heavily front-loaded early in 2025 prior to the tariffs being imposed.
With the Supreme Court striking down the IEEPA tariffs, we should expect some savings to eventually flow back to consumers over time. A new paper from the same authors shows that when Canada withdrew its retaliatory tariffs on the US last year, their retail prices of affected products fell rapidly in response. However, the effect depends on whether retailers expect future tariffs to be imposed. Given that Trump has indicated he intends to impose new tariffs to replace IEEPA, firms will probably yet again adopt a wait-and-see approach before passing any savings to consumers.
President Trump and those in his administration have insisted that consumers are not bearing any of the tariffs. But the latest data show exactly the opposite. We should expect any new tariffs that President Trump imposes to likewise burden consumers.
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