How do tariffs and trade policy historically affect consumer food and energy prices according to academic research?
Executive summary
Academic research and central‑bank analyses find that tariffs reliably raise consumer prices—often passed through substantially to buyers—and that the effects on food and energy are non‑uniform: food prices typically rise modestly (low single digits in many studies), while energy prices are less affected when exempt but can rise if tariffs target energy inputs or trigger exchange‑rate and supply disruptions [1] [2] [3] [4]. Timing matters: pass‑through can be quick for retail goods but build over months via intermediate inputs and supply‑chain adjustments [5] [6] [7].
1. How pass‑through works and why consumers pay the tax
Economists treating tariffs as a tax find high pass‑through to domestic prices: conventional empirical work on the 2018–19 U.S. tariffs documents near‑complete incidence on importers and consumers, producing higher prices for intermediates and final goods and lowering real income [1] [8]. Multiple recent event‑study and daily‑price analyses also show measurable retail pass‑through—Cavallo and colleagues estimate ~20 percent retail pass‑through in early 2025 but central‑bank studies find larger cumulative effects on PCE measures over months [6] [5] [9].
2. Food prices: modest direct effects, amplified by input channels
Studies that decompose tariff impacts on consumption baskets conclude food is exposed but less concentrated among high‑tariff product categories, producing modest average rises—Yale’s Budget Lab estimates food prices up ~2.6% short‑run and ~3% long‑run under the 2025 tariff set, while Federal Reserve letters caution that tariffs on goods used as inputs can raise food via intermediate channels [2] [3]. The Atlanta and Boston Fed analyses show that everyday retail purchases including food would register price increases under broad tariff scenarios, even if food’s share of imports is smaller than some manufactured goods [10] [4].
3. Energy prices: conditional effects and policy choices
Energy’s exposure to tariffs depends on whether policy explicitly targets energy imports and on exemptions; several 2025 proposals exempted energy and critical inputs, muting direct energy pass‑through, while scenarios that include Canadian energy would raise consumer energy costs [11] [2] [4]. Central‑bank research underscores that tariffs can also affect energy prices indirectly through exchange‑rate movements, supply‑chain frictions, or by raising production costs for energy‑intensive goods, but historical datasets often show smaller or more delayed effects on headline energy components than on goods [5] [3] [9].
4. Timing, substitution and the long run: rents, variety loss, and redistribution
Short‑run estimates capture the immediate border‑price shock; over time consumers and firms substitute toward cheaper sources or domestic alternatives, which reduces but does not erase price gaps—Yale and Richmond Fed work find substantial short‑run spikes (2–3% price‑level effects) that attenuate but leave persistent higher relative prices for affected categories such as apparel and some food items [11] [2] [8]. Academic and policy authors also warn tariffs reduce available varieties and can reallocate resources, producing welfare losses concentrated among lower‑income households who spend larger shares on affected goods [1] [11].
5. Uncertainties, retaliation and broader macro dynamics
Research stresses large uncertainties: measured inflation effects can be confounded by concurrent shocks (supply chains, labor markets, energy shocks), retaliation can erase any favorable terms‑of‑trade gains, and some empirical work finds tariff impacts resemble a short‑run demand shock (initially slowing activity) before feeding through to higher inflation later [5] [12] [13]. Policy papers therefore present ranges—each 10 percentage point tariff rise often maps to small producer‑price increases (~1%) that can translate into modest CPI/PCE upticks depending on import shares and pass‑through assumptions [8] [3] [4].
Conclusion: what the literature says about food and energy specifically
The consensus across academic articles and Fed analyses is clear in direction: tariffs tend to raise consumer prices, food showing modest but tangible increases through both direct import exposure and intermediate‑input channels, and energy being sensitive to whether it is targeted or exempt [1] [2] [3] [4]. Quantitatively, recent 2025‑era studies place short‑run aggregate price‑level effects in the low single digits (2–3%), with food rising roughly ~2–3% under the studied tariff packages and energy effects varying based on exemptions and indirect channels [2] [11] [5]. Where the literature diverges is on timing, exact pass‑through magnitudes across retail categories, and the role of retaliation—areas that central banks and academic teams continue to probe with high‑frequency price data [6] [7].