Working Paper
Paying More and Buying Less: 2025 Tariffs and U.S. Household Spending
Abstract: This paper estimates the effects of the 2025 U.S. tariffs on household spending using transaction-level data linked to tariff exposure and a tariff sentiment survey. Comparing high versus low tariff-exposed categories, we find 15 to 20 percent price pass-through. At the mean increase in tariff exposure, prices rise by 1 to 2 percent while spending falls by roughly 4 percent. Survey evidence linking stated intentions to revealed behavior identifies a mechanism for the large spending response: reallocation toward essentials and trade-down within categories, concentrated among middle-income households with discretionary slack who express tariff concerns. Low-income households bear a disproportionate welfare burden through regressive pass-through.
JEL Classification: F13; D12; E31;
https://doi.org/10.17016/FEDS.2026.035
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https://www.federalreserve.gov/econres/feds/files/2026035pap.pdf
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Bibliographic Information
Provider: Board of Governors of the Federal Reserve System (U.S.)
Part of Series: Finance and Economics Discussion Series
Publication Date: 2026-06-02
Number: 2026-035