How do tariffs change prices for ordinary households?

Question

Todd Allyn · Accepted Answer

A tariff is a tax paid by the importer, and most of it is usually passed on in higher prices for imported goods and goods made with imported parts. The Congressional Budget Office estimated in May 2026 that foreign exporters absorbed only about 5 percent of recent US tariff costs. A tariff is a tax on imported goods. The importing business pays it at the border, not the foreign seller. The question for a household is who ends up carrying that cost. The business can absorb the tax, push it back to the foreign supplier, or raise its own prices. A study of the 2018 US tariffs in the Journal of Economic Perspectives (2019) found complete pass-through into domestic prices of imported goods. The US Congressional Budget Office reported in May 2026 on tariffs imposed since early 2025. Foreign exporters absorbed about 5 percent of the cost, on average. It noted some newer research putting that share near 10 to 15 percent by late 2025. Prices can rise in two ways. Imported goods cost more, and domestic makers who compete with imports or use imported parts can raise prices too. The CBO linked higher core goods inflation in apparel, furniture and appliances to this channel. For a household, the effect shows up as less purchasing power, mostly on goods rather than services. In June 2025, the CBO estimated tariffs then in place would raise the PCE price level about 0.9 percent by 2026, versus baseline. Durable goods such as appliances and vehicles were expected to see the largest increases.

How do tariffs change prices for ordinary households?

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