With the start of another holiday season, have you found the cost a little dearer this year? Buying the ingredients for Thanksgiving? Purchasing gifts for Christmas or Hanukkah or Kwanzaa.
You’re probably fine if you celebrate author Daniel O’Keefe’s Festivus, made famous through the sitcom Seinfeld, because the airing of grievances is luckily an ever-filling bucket of cash-free discontent.
However, if your experience is with one of the longer-held traditions, you have to shell out more than last year unless you cut back. That isn’t new. There is almost always some level of inflation, and in “normal” times, according to the Federal Reserve, the year-over-year difference should be around 2%.
Research Says Tariffs Have Raised Inflation
According to the last measure of inflation by the Bureau of Labor Statistics, it’s more like 3% right now, or half again as much of a jump as usual. According to a new working paper published at the National Bureau of Economic Research, the reason in the U.S. is the tariffs ordered by President Donald Trump. In the estimate of the researchers, 0.7 percentage points of the increase are due to the administration’s trade policies.
Working papers are early versions of academic studies before peer review and comment. They can change over time but are still worth reading and considering. This new paper is titled Tracking the Short-Run Price Impact of U.S. Tariffs by Professor Alberto Cavallo of the Harvard Business School; Paola Llamas, an empirical research fellow at Northwestern University’s Kellogg School of Management; and Franco Vazquez of the Department of Economics of the Universidad de San Andres.
Tracking Tariffs
As the researchers noted, in early 2025, the U.S. began to apply a 10% duty to most imported goods, with rates as high as 145% on some imports from China and up to 50% for a few other countries. It has been the biggest shift in U.S. trade policy in decades.
Understanding the economic impacts has been a challenge. Trump would postpone and change the policy details. Some exporters to the U.S. may have somewhat lowered their pricing, which would result in lower tariff rates. Chances are good that some less scrupulous trading partners might have rerouted products so they would appear to originate from countries that faced lower tariff rates.
The researchers created “new high-frequency retail price indices that isolate the short-run impact of tariff shocks across goods and source countries.” Using micro-level retail price data and detailed information on product origin and tariff classifications, the researchers looked at daily prices from five major U.S. retailers to country-of-origin data.
They then trained artificial intelligence models to identify product origins and then match the data to changes in tariffs to see how retail prices fluctuated with tariffs.
Tariff Impacts
It isn’t a perfect approach. Many imports aren’t sold directly to consumer but are rather to businesses that use them internally or incorporate them into their own products or processes. Retailer data won’t capture that part of the tariff impact.
However, the data, even if incomplete, is useful to consider. The researchers found that retail prices adapted to the tariffs. Prices began to rise within days of the announcement and increased over the following months. Between March and September, imported goods’ prices were up 5.4% over pre-tariff trends, while domestic goods rose by 3%.
“These increases, while small relative to some announced statutory tariff rates, are sizable relative to the applied tariff rates — net of exemptions — of about 19.9 percent that we estimate for our sample of products,” they wrote.
They also estimated that after six months, retail tariff pass-through rates climbed up to 20%. Even without 100% passthrough, they found that price differentials under the 2025 tariffs added about 0.7 percentage points to the all-items Consumer Price Index, one official measure of inflation. Instead of 2.9% inflation in August 2025, the number would likely have been about 2.2%.
The additional inflation, by the way, is actually a form of regressive taxation, like a value-added tax on goods in Europe. The extra money you spend ultimately goes to the government.