Paying More and Buying Less: 2025 Tariffs and U.S. Household Spending

Leo Feler and Sinem Hacioglu Hoke

No 2026-035, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

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.

Keywords: consumption; trade policy; welfare economics; distribution (economics); consumer economics (search for similar items in EconPapers)
JEL-codes: D12 E31 F13 (search for similar items in EconPapers)
Pages: 86 p.
Date: 2026-06-02
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:103379

DOI: 10.17016/FEDS.2026.035

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