Tariff pass-through has arrived and is accelerating: consumers now absorb roughly half to two-thirds of the cost, adding about 0.2-0.4 points to core inflation

Summary

Most of the tariff cost is now landing on US consumers and businesses rather than foreign exporters, and the share reaching consumer prices specifically has been rising steadily through 2026 as firms finish a slow, staggered repricing process. At the border, foreign exporters have cut their prices by only 6-14% in response to tariffs (NY Fed), meaning 86-94% of the tariff itself is paid by US importers. Downstream, Goldman Sachs' incidence tracking shows the split between US businesses (absorbing cost via lower margins) and US consumers (paying higher prices) has shifted sharply toward consumers: from roughly 37% consumer / 51% business in August 2025 to about 55% consumer / 22% business by the end of 2025, with consumers' share projected to keep climbing toward 67-70% by mid-to-late 2026. In aggregate inflation terms, Fed research (Minneapolis Fed, NBER, St. Louis Fed) converges on tariffs adding roughly 0.2-0.4 percentage points to core PCE inflation as of July 2026 (about 0.8pp to overall CPI per NBER), a real but partial slice of the current inflation overshoot — core PCE is running about 1 point above the Fed's 2% target even after tariff effects are excluded. Pass-through is uneven by category and still incomplete: apparel/footwear inflation jumped from 0.3% to 3.5% year-over-year between December 2025 and July 2026, while heavily-tariffed new vehicles have barely moved, and a New York Fed survey finds nearly half of tariff-paying firms still plan further price increases in the next six-plus months.

How much of the tariff itself reaches consumers vs. is absorbed at each stage

Three distinct "stages" of absorption matter and are easy to conflate:

1. Foreign exporter absorption (smallest): the New York Fed (Liberty Street Economics, Feb 2026, "Who Is Paying for the 2025 U.S. Tariffs?") found that a 10% tariff caused only a 0.6 percentage point decline in foreign export prices over the first eight months of 2025 — implying roughly 94% pass-through into US import prices, easing only slightly to about 86% by November 2025 as some foreign suppliers began cutting prices modestly. In short: foreign sellers are absorbing well under 15% of the tariff.
2. US importer/retailer margin absorption (large initially, shrinking): Goldman Sachs' incidence-tracking work shows US businesses (importers, wholesalers, retailers) initially absorbed the majority of the remaining cost through compressed margins — about 51% of total tariff cost as of August 2025 — but that share has fallen sharply, to roughly 22% by the end of 2025, as firms worked through fixed-price contracts and cautiously raised prices (a "trickle-up" strategy, per NY Fed's regional business surveys).
3. Consumer price pass-through (rising, now the largest single share): Correspondingly, consumers' share of the total tariff cost burden rose from about 37% (Aug 2025) to roughly 55% by the end of 2025, with Goldman projecting a further climb toward 67-70% by mid/late 2026 as firms finish adjusting prices.

Put together: most of the tariff tax is not being eaten by foreign exporters, and the portion of it borne domestically is shifting rapidly from business margins onto consumer prices — the pattern is a slow, multi-quarter build rather than an immediate one-for-one price jump.

What that means for overall inflation

Multiple independent Fed research teams converge on a similar magnitude for tariffs' contribution to aggregate inflation, even though their precise numbers differ slightly by index and vintage:

• Minneapolis Fed (Aug 2026, PCE data through July): tariffs add 0.2-0.4 percentage points to core PCE inflation (23bp using an unweighted regression, 38bp weighted) — with core PCE itself running 3.3% year-over-year, the highest outside the pandemic since the early 1990s. The Minneapolis Fed's calculation implies that absent tariffs, core PCE inflation would still be about 1 percentage point above the Fed's 2% target — tariffs explain only part of the current overshoot, not most of it. A comparably sized contribution (about +0.4pp to core goods PCE) is coming from AI-driven demand for electronics/computer hardware, a factor unrelated to tariffs.
• NBER (Amiti, Heise, et al., w35561, 2026): find a larger tariff contribution of 2.2 percentage points to CPI goods inflation through February 2026, translating to about 0.8 percentage points to overall CPI — a bigger number than the PCE-based Minneapolis Fed estimate, consistent with CPI weighting goods more heavily than the broader PCE basket and reflecting an earlier measurement date before some further disinflationary noise.
• St. Louis Fed (Aug 2026): reports a matching, roughly stabilizing tariff-inflation contribution in recent months, corroborating the Minneapolis Fed figure.

AskAmerica's own econ.inflation_metrics table (BLS CPI-U, all items, NSA) confirms the broader inflation backdrop this pass-through is showing up against: year-over-year CPI-U inflation accelerated from about 2.4% in January 2026 to a peak of roughly 4.3% in May 2026, before easing modestly to about 3.4% by August 2026 — consistent with the "pass-through has arrived" story after a delayed start in 2025.

Uneven by category — and still not finished

Pass-through is highly category-specific, which is itself informative about where absorption is (and isn't) happening:

• Apparel and footwear — one of the most heavily tariffed consumer categories — saw year-over-year inflation jump from 0.3% in December 2025 to 3.5% in July 2026 (Minneapolis Fed, using BEA PCE data), a sharp acceleration from a near-zero pre-pandemic trend.
• New motor vehicles, despite also facing high tariff exposure (and additional auto-parts tariffs recently announced), have not shown a comparable price jump yet — plausibly reflecting inventory drawdown of pre-tariff stock, deliberate margin absorption to protect competitiveness/demand, and dealer-level discounting/incentive adjustments that offset list-price increases.
• A July 2026 NY Fed regional business survey found that 44-47% of firms that have directly paid tariffs still plan additional price increases, some more than six months out — driven by fixed-price contracts that delay pass-through and a deliberate "trickle-up" pricing strategy firms use to avoid shocking customers. This means a meaningful share of the eventual consumer-price effect has not yet landed even as of September 2026.

Bottom line

As of the data available through August/September 2026: the large majority of the tariff (86-94%) is being paid at the border by US importers rather than absorbed by foreign exporters cutting prices. Of what US firms absorb, the share reaching consumers directly, via retail prices, has risen from roughly a third to just over half in the past year and is still climbing toward two-thirds or more by Goldman's projections. In aggregate terms this is adding a real but partial 0.2-0.4 percentage points to core inflation — with the rest of the current inflation overshoot (core PCE about 1 point above target even net of tariffs) attributable to other forces, notably AI-driven demand for computer/electronics goods. Pass-through has been unusually slow and staggered — taking the better part of a year to fully show up, category by category — and is not yet complete: a large minority of tariff-paying firms still have price increases in the pipeline.

Every query behind this report

1 warehouse call ran in this session, in order. Each is reproducible against the same snapshot.

SELECT "year", period, value FROM econ.inflation_metrics WHERE series='CUUR0000SA0' AND "year" >= 2024 ORDER BY "year", period