The effective US tariff rate has fallen from a peak of 11% in late 2025 to just below 7% in May 2026, and the pass-through of tariffs into consumer prices has levelled off in recent months, according to research published by the Federal Reserve Bank of St Louis on 18 August. The decline in the effective rate accelerated after a February 2026 Supreme Court ruling, and the Fed researchers found that since March 2026, other factors, most notably rising energy prices, have become the main drivers of the excess inflation once attributed largely to tariffs.
A cooling story, not a closed one
For businesses and consumers who spent 2025 watching import taxes show up in retail prices, the finding is welcome: the inflationary bite of tariffs is, for now, not getting sharper. Earlier Fed research had estimated that tariffs added as much as 0.8 percentage points to core inflation at their peak. Separate analysis from the Yale Budget Lab has put the average household cost of the tariff regime at several hundred dollars a year, a real but no longer accelerating burden compared with the sharper increases households faced in 2025.
Why the data cannot be read as an all-clear
The St Louis Fed researchers were explicit that their findings describe a stabilisation, not a reversal, and that future dynamics remain uncertain, particularly given new tariffs announced in late July 2026 whose effects have not yet fully worked through supply chains and retail pricing. Businesses that absorbed tariff costs into their margins rather than passing them on immediately may still pass on delayed increases, a pattern documented in earlier rounds of tariff pricing. The effective rate, though down from its peak, also remains far above pre-2025 levels, meaning the cumulative tax on imports has not gone away even if its monthly rate of change has slowed.
Why It Matters
Whether tariffs continue to cost the average household several hundred dollars a year or start climbing again will depend on decisions still being made in Washington and on how quickly newly announced levies filter through to shelves. For a Federal Reserve trying to judge how much of current inflation is tariff-driven versus energy-driven, the distinction matters for interest rate policy; for households, it matters for the price of everyday goods heading into the end of the year.
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