For the 12 months ended September, consumers were stressed by sharp increases in several food products. Overall meat prices were up 8.5%, with beef and veal prices climbing 14.7%. Other price increases included coffee skyrocketing 18.9%, while apples and bananas were up 5.3% and 6.9%, respectively. Fresh vegetables were up 2.8%, while canned fruits and vegetables climbed 5.0%. In just the two-month period of August and September, overall food at home rose nearly 1% with meats, fruits and vegetables, nonalcoholic beverages, and coffee having price increases over 1.0%. Apparel, appliances, furniture and bedding, household supplies, and sporting goods also had price increases greater that 1.0% over the two-month period of August and September. Energy prices rose sharply, increasing over 2%. One of the big questions is the extent to which tariffs will impact inflation. A variety of studies have indicated that although tariffs have recently impacted prices, the ultimate effect is yet to be determined. A study by the Federal Reserve Bank of St. Louis found that tariffs have accounted for a sizable share of recent inflation. Recently imposed tariffs added 0.5 percentage points to inflation from June through August. The St. Louis Fed study notes that tariffs, as of yet, have not driven up consumer prices as sharply as initially predicted. Their research indicated that many businesses are waiting to see where tariff rates settle before they adjust their prices. Tariffs can have direct and indirect effects on consumer prices. The direct impact of tariffs includes the price increase of the import price itself. The indirect impact of tariffs on prices includes the substitution of domestically available products for imports. The domestically available products have become more price competitive due to the tariffs on imports, but still raise the prices of products to consumers. The indirect impact of tariffs on price levels will likely be smaller than the tariff increase. Research by The Pricing Lab at the Harvard Business School Digital Data Design Institute tracked retail prices using real-time barcode data on a variety of products. Data through early October showed that tariffs have raised retail prices on average by about 4.9 percentage points relative to the pre-tariff trend, including a 6.0 percentage point increase for imported goods and a 4.3 percentage point rise for domestic goods. Large price increases were noted for several products, including apparel (8.99 percentage points), coffee and tea (7.5 percentage points), cameras (7.5 percentage points), household textiles (6.2 percentage points), and furniture (6.5 percentage points). The Yale Budget Lab estimated that the tariff policies in effect as of October 31 will increase prices by 1.3% in the short run, representing an annual loss of $1,800 for the average household and $1,000 for households in the bottom decile of the income distribution. As a percentage of income, the annual loss due to tariffs is greatest for households in the lowest decile of household income and least for households in the top decile of household income. Tariffs contribute to the K-shaped economy. Product prices most adversely impacted by the 2025 tariffs include apparel, products with high metal content like electrical equipment and computers, and motor vehicles. The tariffs will also negatively impact economic growth and employment. Future price increases may also be impacted by import trends. The chart below shows U.S. imports of goods over the period from January 2022 through July 2025. After peaking at $289 billion in March 2022, imports steadily declined before bottoming out at $252 billion in June 2023. A steady rise brought imports to $281 billion in September 2024. In 2025, U.S. companies front-loaded imports and inventory prior to the pending April reciprocal tariffs. A record $345 billion of imports (seasonally adjusted) were recorded in March 2025, up nearly 25% from the $280 billion in November 2024. Imports dropped to $263 billion in June before increasing in July. The questions become: 1. How long will it take companies to work through pre-tariff inventory? 2. How will costs to businesses and prices to consumers be impacted when pre-tariff inventory is gone?
6
Center for Business and Economic Insight
Made with FlippingBook Learn more on our blog