Is tariff-driven inflation finally going to show up in the US?
Let me make a few observations and ask fellow members of the pricing community whether they draw a similar conclusion.
- We have seen little change in headline inflation: Over the 12 months, there has been no clear point where everyone can say “aha, that’s where we see the effects of higher tariffs on prices.” In fact, the overall inflation rate, as measured by the CPI, has fluctuated between 2.3% and 3.0% since June 2024 and currently stands at 2.7%.
- Inflation is still above the Fed target: The US Federal Reserve prefers personal consumption expenditures (PCE) to measure inflation, and while the numbers differ from the CPI’s from month to month, the overall picture is the same, even after the data released this week: price inflation in the US has been relatively stable for a while, but still persistently above Fed’s target annual rate of 2%.Year-on-year inflation rates, US vs. EUYear-on-year inflation rates, US vs. EU
- Headline inflation may be masking underlying tariff effects: Inflation rates have been declining steadily since they peaked in the summer of 2022. But we also can’t rule out that inflation due to tariffs has stunted an ongoing downward trend in US inflation, with the net result being only a slight uptick in year-on-year inflation since May 2025. That would be consistent with the observation that the inflation rate in the Euro zone has already fallen to around 2%, while the US is seeing an uptick when measured using PCE. Inflation rates in the two economies are diverging, with US inflation at least half a percentage point higher than the Euro zone’s in each of the last six months.
- Upward price pressure is brewing: One reason for the minimal impact of tariffs on inflation was the advanced buying that many companies undertook before the tariffs took effect in 2025. But as Amazon CEO Andy Jassy explained in an interview this week at the World Economic Forum, the inventories that Amazon and many third-party sellers built up ahead of the tariffs were depleted last fall.
My conclusion is that the US has already seen some tariff-driven inflation, even if the effects don’t leap off the page. The underlying pressures appear to be increasing in 2026. That leaves sellers with the same three basic options as 2026 begins, but without the ability to front-load inventory at pre-tariff prices. They can pass on costs to consumers, absorb them, or have suppliers bear the burden. How companies respond should also depend on which pricing game they are playing.
Through August 2025, those strategic decisions tended toward keeping prices stable for consumers. A Goldman Sachs report cited in the New York Times revealed that companies had absorbed around half of the cost of higher tariffs, passed along around 37% to customers, and forced suppliers to absorb around 9%.
But those proportions may change in 2026. Jassy said that he is now seeing an uptick in prices on the e-commerce platform. My BCG colleagues and I are getting a similar sense from companies that upward price pressure is coming.
“We’re going to do everything we can to work with our selling partners to make prices as low as possible for consumers,” Jassy said told CNBC. “But you don’t have endless options.”
Original article can be found here.