Tariffs are expected to start showing up more in consumer prices as holiday shopping season starts
Shoppers in Beavercreek, Ohio, USA on Tuesday, October 21, 2025.
Kyle Grillot | Bloomberg | Getty Images
While the impact has eased so far this year, the tariffs are expected to catch up with the prices consumers pay just in time for the holiday shopping season.
President Donald Trump’s tariffs on numerous products and individual countries, which began in April, coincided with general inflation measures that have been running between 2.5% and 3% this year.
While economists have not seen a major increase in common measures such as consumer price and personal consumption price indexes, they expect the tariffs to keep those indicators high at a time when they would otherwise fall to lower levels.
“There have been some questions in recent months about whether tariffs are leading to higher inflation for consumers,” Bank of America economist Aditya Bhave said in a note. he said. “We think there is no debate; tariffs have increased consumer prices.”
Tariff impacts have diminished so far as companies build up inventory ahead of tariffs and absorb some of the impact through compressed profit margins.
But Bank of America expects the tariffs to add about half a percentage point to the key PCE measure the Federal Reserve uses when assessing inflation. When it comes to tariffs, BofA predicts the inflation rate will be 2.9% in September; So without tariffs, this means a rate of close to 2.4%. The numbers are similar to those cited by Fed Chairman Jerome Powell on Wednesday. In August, on an annual basis, core PCE was 2.9%.
These percentage point differences are important for the Fed, which is trying to keep core inflation excluding food and energy at 2%, the level seen since March 2021. Two Fed officials — regional governors Jeffrey Schmid of Kansas City and Lorie Logan of Dallas — said Friday that their colleagues disagreed with Wednesday’s decision to cut the central bank’s key interest rate.
They are also important to consumers. Bhave estimates that shoppers shoulder about 50% to 70% of the total tariff costs, with businesses bearing the rest.
Effect on cash register
In real-world terms, that has meant higher prices on things like coffee, furniture and, most recently, clothing, which rose 0.7% in September, according to the Bureau of Labor Statistics. Even though they are small components of price indices, they are products that consumers frequently purchase and can create perceptions of inflation, creating a self-reinforcing cycle that pushes prices up.
“Inflation in certain goods can have a very large impact on consumer confidence, even if those items have a negligible weight in the CPI basket,” TD Cowen analysts wrote in a note. he said. Price increases on items like eggs “create a constant, tangible feedback loop at the grocery store week after week. Such items shape perception more than their statistical significance suggests.”
The company noted that such things may be seen more this holiday season because nearly all artificial Christmas trees are imported from China, which faces heavy costs under Trump tariffs.
“While artificial Christmas trees are not unique, they provide a clear example of how high-tariff, seasonal products can shape consumers’ perception of inflation,” Cowen said.
If the taxes were implemented during the 2024 holiday season, shoppers would spend an additional $40.6 billion. LendingTree estimates using data from multiple government and private sources.
LendingTree’s Budget Lab also estimates that approximately 70.5% of new tariffs will be passed on to consumers by June 2025.
“This means more Americans will have to turn to credit cards and personal loans to cover the cost of buying gifts,” said Matt Schultz, the firm’s chief consumer finance analyst. “This is the unfortunate reality many people will face.”
Using the same estimates, LendingTree said the tariff cost was $132 per customer.
