Inflation is a core indicator for measuring macroeconomic stability, directly related to residents' cost of living, social welfare levels, and the direction of monetary policy adjustments. How and how quickly tariffs push up consumer prices has become a key issue in recent macroeconomic and trade research. Based on the latest tariff policy practices from 2025 to 2026, this paper, based on the latest research findings, systematically analyzes the transmission magnitude, channels, and time lag characteristics of tariffs to retail consumer prices. The core conclusion of the study shows that for every 1 percentage point increase in average tariffs, retail prices of consumer goods rise by approximately 0.25 percentage points one year later. The overall price effect is composed of both direct import price effects and indirect domestic production effects, and the transmission speed of these two types of effects differs significantly. Specifically, about two-thirds of the price increase comes from direct price increases in imported consumer goods; the remaining one-third comes from increases in domestic commodity prices. The main reasons for domestic price increases are twofold: first, domestic enterprises need to import components and raw materials for production, and tariffs push up production costs; second, after the price increase of imported goods, the competitive pressure on domestic manufacturers decreases, thereby increasing the profit margin for products. The superposition of these two mechanisms means that the impact of tariffs on prices is not a one-time event, but rather a gradual release within a year.

Direct transmission: Import prices almost immediately follow tariff increases.

After tariffs are implemented, the prices of imported goods will adjust rapidly. Unless foreign exporters voluntarily lower prices to absorb the tariff costs, the increased tariffs will essentially be passed on to US imports. Data up to February 2026 shows that nearly 90% of the tariff burden since 2025 has ultimately been passed on to import prices, with very little being absorbed by overseas manufacturers. This transmission is highly immediate: in the first month after a tariff increase, import prices rise almost one-to-one. Even considering exchange rate fluctuations (a temporary depreciation of the US dollar also pushes up import prices), the tariff transmission rate remains stable at around 90%. Correspondingly, in the end-consumer market, the retail prices of imported goods adjust quickly; half of the price increase can be transmitted within three months, and almost all direct price effects are completed within six months.

Indirect transmission: Domestic product prices adjust slowly and with a lag.

Unlike the rapid response of import prices, the impact of tariffs on the prices of domestically manufactured goods in the United States exhibits a significant lag, with the full transmission taking 6 to 12 months. This indirect transmission occurs primarily through two channels. The first is the marginal cost channel. A large portion of the US manufacturing sector relies on imported steel, components, raw materials, and other intermediate goods. Tariffs increase production input costs for businesses, ultimately reflected in factory gate prices. The second is the strategic complementary competition channel. After imported goods prices rise, market competition pressure on domestically produced similar products weakens. Manufacturers, no longer needing to maintain low prices, will proactively raise markups, further pushing up domestic prices. Empirical results show that the cost channel's price increase effect is stronger than the competition channel. In terms of timing, the increase in domestic factory gate prices is very limited in the first six months after tariffs take effect; however, in the following six months, as supply chain costs are passed on layer by layer, the price increase significantly expands, nearly doubling. This slow adjustment on the domestic production side is the core reason why overall consumer prices take a year to fully materialize.

Retail price transmission: The realization ratio of upstream and downstream prices is approximately 50%.

Import prices and domestic ex-factory prices only represent the upstream costs of goods. The final retail price also includes distribution costs such as transportation, wholesale, and store operations. Distribution profit accounts for approximately half of the final price paid by consumers; therefore, upstream price increases are not entirely passed on to the final selling price. Calculations show that the proportion of import and ex-factory price increases caused by tariffs that are ultimately passed on to the retail end is approximately 56%. A simple example can illustrate this: a product retails for $100, of which $50 is the ex-factory/import cost and $50 is the distribution cost. If tariffs increase upstream costs by 10% (from $50 to $55), with distribution costs remaining unchanged, the retail price rises to $105, an increase of 5%, which is basically consistent with empirical calculations.

Overall price effect: all price increases completed within one year

Considering the combined effects of direct imports, indirect domestic production, and retail distribution, a 10% tariff on all imported goods would raise consumer prices by 2.6% overall after twelve months, meaning the increase in final prices would be approximately one-quarter of the tariff increase. Two-thirds of this increase would come from rising prices of imported consumer goods, while one-third would come from rising prices of domestically produced goods, with cost transmission being the primary driver of domestic price increases. The overall price increase exhibits a clear phased characteristic: direct price increases for imported goods materialize quickly, largely completed within six months; while indirect price increases for domestic goods accumulate continuously, rising steadily over six to twelve months. Therefore, the full impact of tariffs on consumer prices will take about a year to become apparent.

Real price performance in 2025-2026 and forecast for 2027

By comparing the prices of non-oil consumer goods (excluding services) with high and low tariff exposure, this study isolates the independent inflationary impact of tariffs, eliminating interference from macroeconomic variables such as exchange rates, wages, demand, and monetary policy. Data shows that consumer goods inflation remained low in 2024, within a slight deflationary range; after the new tariffs were implemented in 2025, price inflation continued to rise. As of February 2026, tariffs contributed 2.9 percentage points to consumer goods inflation; without the tariffs, consumer goods prices would have fallen slightly. Looking ahead to September 2027, the inflationary effect of tariffs has peaked, but the price level has permanently increased. In February 2026, the price level increase caused by tariffs reached its peak (approximately 3%), with 70% coming from direct import effects and 30% from indirect domestic effects. In the first half of 2026, the Supreme Court adjusted the emergency tariff policy and lowered the surcharge rate, causing the tariff price effect to fall back to around 2%, with the decline mainly concentrated on the sensitive import price side; the price increase effect of domestic production costs has stronger sustainability. After August 2026, the price level effect will rise slightly again, due to the lagged transmission of tariffs on Canadian goods and the advance pricing effect of new tariffs on automobiles and auto parts in January 2027. In terms of inflation growth, the inflationary pull of tariffs will peak in February 2026, largely subside by mid-year, briefly turn negative, and then slightly turn positive again by mid-2027. The overall pattern is that tariffs push up the central price level, but will not push up the inflation rate in the long term.

Summarize:

Conservative estimates suggest that the inflationary effect of tariffs will peak in September 2027, but the price level will permanently rise. The transmission of tariffs to consumer prices follows a clear pattern in terms of magnitude and timing: approximately one-quarter of the tariff increase will eventually be passed on to end-consumer prices. Direct price increases for imported goods are implemented quickly, completing the transmission within six months; indirect price increases for domestic goods are delayed and prolonged, accounting for one-third of the overall price increase effect and requiring a year to fully manifest. Therefore, assessing the price impact of tariffs cannot solely rely on short-term import price fluctuations; it is crucial to pay attention to the delayed transmission through the supply chain over the next year, which will ultimately result in a permanent increase in consumer prices.