Before the Supreme Court struck down President Trump’s International Emergency Economic Powers Act (IEEPA) tariffs as unlawful, the 2025 trade landscape had already begun to shift costs onto American consumers. Data suggests that while the tariffs were active, they drove retail prices for imported goods approximately 7 percentage points above their normal trends.
While the Court’s ruling invalidated nearly 75% of the tariffs imposed in 2025, the future of retail prices remains uncertain as the administration looks for new ways to replace the lost levies.
How Tariffs Drive Up Prices
Tariffs act as a hidden tax that reaches the consumer through two primary channels:
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Direct Pass-Through: Research from the 2018 trade war confirms that U.S. importers—not foreign exporters—pay the vast majority of the tariff. While some businesses initially “absorb” these costs by accepting lower profit margins, most eventually pass the expense to the final consumer.
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Indirect Domestic Hikes: When tariffs make imports expensive, domestic producers (like steel and aluminum mills) often raise their own prices. They stay just competitive enough to undercut the “tariff-burdened” import price, meaning consumers pay more even for “Made in America” goods.
Real-World Price Spikes
Harvard economists using real-time barcode data found that by early 2026, the ripple effects were visible across multiple sectors. Even domestic goods saw a 4.8 percentage point increase as a result of the trade environment.
Table: Percentage Point Increase in Retail Prices (Above Trend) | Category | Price Increase | | :— | :— | | Clothing (Imported) | +17.5% | | Building Materials | +10.5% | | Coffee & Tea | +10.0% | | Household Textiles | +8.0% | | Fish & Seafood | +7.9% | | Furniture | +7.4% |
Note: Imported clothing prices specifically surged by over 20 percentage points, while domestic alternatives rose by only 8%, proving that tariffs—not general inflation—were the primary driver.
Why Prices Didn’t Rise Even Higher
Despite statutory tariff rates being much higher than 7%, retail prices stayed somewhat tempered due to three factors:
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The “Wait-and-See” Approach: Businesses were hesitant to overhaul pricing strategies while the Supreme Court case was pending.
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Fixed Contracts: Many industries, such as farm equipment, operate on annual leases or long-term contracts that locked in prices before the tariffs hit.
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Front-Loaded Inventory: Many firms imported massive amounts of stock early in 2025 to beat the tariff deadlines, allowing them to sell older, cheaper inventory.
What Happens Next?
History shows that when tariffs are removed, prices can drop quickly—as seen when Canada withdrew retaliatory tariffs last year. However, because the administration has signaled it will seek alternative legal avenues to reimpose these taxes, retailers are unlikely to lower prices immediately. As long as the threat of new “replacement” tariffs looms, businesses will likely keep prices elevated to hedge against future costs.