Tariff Pass-Through Accelerates; Clothing, Auto Parts Seeing Price Spikes
Tariffs are now actively pushing consumer prices higher as firms complete their pass-through to shoppers. As of July, tariffs contributed 0.2 to 0.4 percentage points to core inflation, with clothing inflation jumping from 0.3% to 3.5% year-over-year since December. Firms plan additional price increases through December 2026.
Tariffs Are Finally Hitting Checkout Lines
As of July tariffs contributed 0.2 to 0.4 percentage points to core inflation; goods facing higher tariffs are now more likely to exhibit excess inflation, a change from April. In the category of clothing and footwear, year-over-year inflation rose from 0.3 percent in December 2025 to 3.5 percent in July 2026. This acceleration marks a turning point: earlier in 2026, firms absorbed tariff costs by squeezing profits, but initially, firms try to absorb costs by reducing their profitability a bit, and changing their suppliers or inventory management, but eventually, they lose their ability to do that, so they pass those costs on to consumers.
What's Coming Next
Some heavily tariffed categories, such as new motor vehicles, have yet to see sizable increases in inflation; moreover, recent additional tariffs on auto parts have been announced. A recent survey conducted by the Federal Reserve Bank of New York finds that firms are planning to pass through further tariff-related price increases. Vehicle buyers and anyone buying imported goods should expect continued upward price pressure.
Overall, the current tariff regime implies an increase in consumer prices of 1.1% in the short run, assuming full passthrough of tariffs to consumers and assuming that the Section 122 tariffs are extended.
For foreigners budgeting household expenses: If you shop for clothing, footwear, auto parts, or electronics, expect sustained price rises through the end of 2026. Imported goods—electronics, furniture, tools—are becoming noticeably more expensive. If you plan to buy a car, know that new vehicle tariffs are still taking effect and auto-part tariffs are being added, so prices will continue climbing. Consider bulk purchases of durable imported goods before tariffs ratchet further, and be aware that online shopping from abroad may face higher duties when importing personal items.
Sources
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