How Much Did Labor Productivity Gains Offset the Inflationary Impact of the 2025 Tariffs?

Philippe Andrade, Omar Barbiero and Álvaro Silva

No 26-7, Current Policy Perspectives from Federal Reserve Bank of Boston

Abstract: In 2025, the average realized tariff on U.S. imports rose from about 2.5 percent to about 10 percent. The resulting increase in U.S. firms’ input costs had the potential to raise inflation significantly and explain why inflation remained significantly above the Federal Reserve’s 2 percent target last year. On the other hand, as the tariffs took hold, U.S. workers’ productivity grew, which could have helped companies reduce their costs and thereby mitigate inflationary pressures from the tariffs. To study the extent to which productivity gains may have offset the tariff-driven cost increases, the authors construct measures of sectoral increases in input costs induced by the new tariffs and compare them with sectoral labor productivity gains.

Keywords: tariffs; inflation; labor productivity; input-output linkages; production costs; trade policy; supply chains (search for similar items in EconPapers)
JEL-codes: D24 E24 E31 F13 (search for similar items in EconPapers)
Pages: 8
Date: 2026-08-19
New Economics Papers: this item is included in nep-eff
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.bostonfed.org/publications/current-pol ... ts-2025-tariffs.aspx Summary (text/html)
https://www.bostonfed.org/-/media/Documents/Workingpapers/PDF/2026/CPP2607.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedbcq:103664

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Current Policy Perspectives from Federal Reserve Bank of Boston Contact information at EDIRC.
Bibliographic data for series maintained by Catherine Spozio ().