Tariffs Are Now Quietly Showing up in Consumer Prices - Here’s Where to Look in Your Own Budget

Climbing prices are making it difficult for many Americans to get ahead financially, and those prices are rising as consumers increasingly pay for tariff costs. A new analysis by the Minneapolis Federal Reserve found that, though tariff pass-through costs were minimal in the spring, tariffs now add up to 0.4 percentage points to July core inflation figures. And consumers - especially retirees living on fixed incomes - are feeling that increased financial strain.

The tariff effect isn't the same across all categories, and inflation is also driving up prices. Here's what to know about why prices are increasing and what to keep in mind when budgeting.

The findings from the Minneapolis Federal Reserve analysis

Neil Mehrotra, Assistant Vice President and Policy Advisor, and Michael E. Waugh, Monetary Advisor, co-authored the analysis. The analysis used personal consumption expenditures price index data through July and found that tariff impacts have become more visible recently when compared to a previous analysis published in April. The new data indicates that tariff pass-through costs add about 0.4 percentage points to core inflation.

Several categories strongly reflect that trend. Clothing, a heavily tariffed category, experienced a year-over-year increase in inflation of 0.3% in December 2025. In July 2026, that increase was 3.5%.

Over the last year, women's and girls' clothing experienced excess inflation of 4.66%. That figure is close to the 4.77% tariff effect figure that researchers projected.

Categories largely unaffected by the tariffs

Other categories appear to remain largely unaffected by pass-through tariff costs. Though researchers predicted a tariff effect of 1.63% on household supplies, those products have experienced almost no inflation.

Mehrotra posed several explanations of why household products don't appear to be affected by pass-through tariffs. It's possible that businesses don't feel they're able to pass through the price increases, so they're absorbing the costs and seeing lower prices. Alternatively, companies might substitute different suppliers to avoid tariffs, or they might find ways to enhance productivity to offset the tariff costs.

How AI contributes to inflation costs

The analysis also highlights the significant impact that AI is having on inflation. AI-driven demand is impacting the video and information processing equipment category. According to the report, the category has reflected an "abnormally high" inflation rate in recent months. Prices are up 12.2% for the category through July 2026, but from 2015 to 2019, category prices fell by 6.5% per year.

"As the AI investment boom drives demand for memory and other computer hardware, the spillovers to goods prices appear to be at least as large as tariffs in keeping core inflation high," the report states.

Categories to watch for future price increases

The analysis suggests that some pass-through tariffs may not have yet taken effect. For example, motor vehicles are heavily tariffed, but they haven't yet shown a significant increase in inflation. Additional tariffs on auto parts have recently been announced.

A survey by the Federal Reserve Bank of New York released in July 2026 found that firms plan to pass additional tariff increases on to consumers. The survey found that 47% of service firms and 44% of manufacturers that paid tariffs directly reported they face more tariff-induced prices; 30% of firms and 40% of manufacturers plan to implement additional cost increases within the next six months. The data indicates that, a year after tariffs were introduced, many businesses are still adjusting their prices, and consumers may continue feeling the effects of the tariffs.

How tariff pass-through costs are impacting retirees

As tariff pass-through costs are increasingly driving up the cost of goods, all consumers feel the impact, but it's particularly hard on retirees. Social Security's cost-of-living adjustment (COLA), which helps benefits keep up with inflation, is set just once per year. In the meantime, retirees must cover the increased costs until the next COLA takes effect in January 2027.

The price increases are showing up now, with more than three months to go before retirees might see a benefits increase. Climbing gas and energy costs are adding to the financial squeeze, especially for retirees in colder climates who may face more expensive heating costs this winter.

Bottom line

Though many of Trump's tariffs were implemented in 2025, the Minneapolis Federal Reserve analysis suggests that businesses are still responding to those tariffs, and consumers have yet to feel their full effect. Tariffs may impact certain categories, like clothing, particularly hard, so it's a good idea to watch those categories closely when budgeting.

As prices increase, watching for deals may help you save. Consider signing up for retailers' e-newsletters to get access to coupons and deals, and take the time to comparison shop online using retailers' flyers before you head to the store. Make and stick to a budget and stock up on items you use frequently when they're on sale to keep more cash in your wallet.

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