Sorry, tariff supporters. The data has spoken
For quite some time, those opposed to President Trump’s tariff approach have been, well, you know, saying that inflation was around the corner. Instead of a wave, it feels like we’ve just seen a little ripple—and now it’s pretty much gone.
Advocates for tariffs had a straightforward argument: increasing tariffs on imported goods would inevitably lead consumers to face higher prices on everything. But recent data from the Harvard Tariff Price Tracker paints a different picture. A year into the tracking, prices don’t seem to have accelerated due to tariffs at all. In fact, the most significant price hikes recently have come from items that weren’t even subject to the tariffs.
The Harvard Tariff Price Tracker builds on research from Harvard economists Alberto Cavallo, Gita Gopinath, and Brent Neiman. It uses current online pricing to assess how tariffs impact various products. It categorizes items into three groups: imported goods directly affected by tariffs, domestic products subject to tariffs or dominated by imports, and domestic products outside of these tariff categories. By analyzing these categories, the tracker delivers a clear perspective on how tariffs influence consumer pricing.
The bottom line is straightforward: year-over-year inflation tied to tariffs is nearly zero. This tracking kicked off in early October 2024, and by mid-October 2025, imports in the tariff group increased by just 2%, aligning closely with the Federal Reserve’s 2% inflation goal. Meanwhile, domestic products linked to tariffs actually dropped by 0.2%. Interestingly, domestic items unaffected by tariffs rose by 1.4%. After a full year of Trump’s tariff policies, price levels across these categories challenge the narrative that tariffs would lead to rampant inflation. Whatever inflation story was anticipated, it didn’t happen.
Liberation Day didn’t cause inflation
Timing is key here. President Trump unveiled the tariff policy on April 2, 2025. Since then, imports in the tariff category saw a modest climb of about 1.8%. However, domestic products in those affected categories dropped about 1.0%. This certainly undermines the theory that local producers would hike prices due to decreased foreign competition. Products unaffected by tariffs also saw a rise of around 1.5%. The evidence is clear: while import prices increased marginally, domestic producers lowered their prices after the tariffs took effect, and prices for unaffected products nearly matched those of tariffed goods.
Interestingly, there was a price bump before Liberation Day back in April. From early February to late March, imported goods in the tariff category went up by 1.8%, with domestic products in that category seeing a similar increase of 2%. Products that weren’t affected also increased significantly, by around 1%.
This period encompassed an initial 10% tariff on Chinese goods introduced on February 4, followed by an increase to 20% and higher tariffs on Mexico and Canada set at 25% by March 4. However, many tariffs on Mexico and Canada were waived due to USMCA exceptions, affecting nearly 40% of Canadian exports and over half of those from Mexico.
Market reactions during this time indicate that the initial tariff shock may have been anticipated. Yet, isolating this effect is tricky, starting as it does six months prior. The Fed initiated a round of rate cuts with a 1% reduction in the target federal funds rate. Given that monetary policy effects lag, the price increases we saw earlier this winter likely stemmed more from monetary easing. Plus, consumer spending surged in March 2025, with real spending up by 0.7% in just one month, potentially contributing to rising prices.
After April 2, when the broader “Liberation Day” tariffs were enforced, though import prices continued to rise, domestic prices in affected categories were effectively reversed. This suggests that competitive market pressures—not tariff protection—are driving domestic pricing.
Passthrough has already ended
Recent trends showcase even clearer patterns. Since early September, prices of imported goods have climbed less than 1%, whereas prices of domestic products in the affected categories declined slightly. Domestic items that were not affected rose by about 0.8% during the same timeframe, outpacing all tariffed categories. This runs counter to traditional expectations. Instead of an inflationary ripple effect from tariffs, data suggests that the market largely adjusted to the initial shock.
In essence, the passthrough phase appears to be over. Tariffs might have momentarily raised import prices, but the overall impact stabilized. Domestic producers are mostly keeping their prices steady or even cutting them, and non-tariffed categories are experiencing greater price fluctuations than those that are tariffed. The economy seems to have assimilated the new tariff landscape and moved on.
The most striking trend is what has unfolded for domestic producers. When tariffs were announced in April, the prevailing belief was that U.S. companies would take advantage of their newfound protections by raising prices. Instead, they went in the opposite direction. Domestic products within the tariff category have decreased since April. Rather than capitalizing on tariffs to charge more, domestic producers remained under competitive pressure and opted to keep prices stable or lower them.
The critical voices and their supportive network of academic economists frequently tout the notion that tariffs inevitably raise prices, but the findings from the Harvard Tariff Price Tracker are now providing real-time data that contradicts that claim.
In summary, the anticipated wave of tariff-driven inflation never came to fruition. Importers absorbed some costs, domestic competition maintained lower prices, and consumers largely felt no change. Today, the year-over-year price level is mostly aligned with the Fed’s targets. The categories most significantly impacted by tariffs now exhibit the lowest inflation rates.
In conclusion, concerns about tariff-induced inflation are not just exaggerated; they appear to be resolved. The evidence indicates that the shock passed months ago, prices have stabilized, and the market has effectively adjusted. Discussions of tariffs igniting inflation have not panned out as many anticipated.
