Tariff Pressures Arrive Just in Time for Holiday Shopping

After months of muted effects, tariffs are set to make their mark on consumer prices as the holiday shopping season kicks off. Economists warn that import duties implemented under President Donald Trump’s trade agenda — which target a wide range of goods and trading partners — are now working their way through supply chains, putting upward pressure on inflation just as U.S. households ramp up spending.

“The impact so far this year has been muted,” said Bank of America economist Aditya Bhave, “but tariffs have pushed consumer prices higher. There’s no debate about that.”

Inflation, as measured by the core Personal Consumption Expenditures (PCE) index, has hovered between 2.5% and 3% throughout 2025. Bank of America estimates that tariffs alone could be adding roughly half a percentage point, meaning that September’s 2.9% core PCE reading might have been closer to 2.4% without them.

The timing is sensitive for both the Federal Reserve and consumers. Fed officials — who lowered interest rates earlier this month — have been hoping for a sustained cooling in inflation. But if tariffs keep prices sticky, that could complicate future rate-cut decisions and prolong higher borrowing costs across the economy.

Businesses Absorb the Hit — But Not for Long

Until now, many companies have buffered consumers from tariff-related costs by building up inventories in advance and absorbing losses through slimmer profit margins. That cushion, however, is beginning to wear thin.

As retailers prepare for the holidays, the cost of imported goods — from furniture and electronics to clothing and toys — is increasingly visible in price tags. September’s 0.7% rise in apparel prices, reported by the Bureau of Labor Statistics, illustrates how tariffs on textiles are filtering into consumer spending categories that are both frequent and psychologically sensitive.

“Inflation in certain goods can have an outsized impact on consumer confidence,” analysts at TD Cowen wrote. “Even small price increases in items people buy weekly — like coffee or clothing — reinforce perceptions that inflation is getting worse, regardless of what official data say.”

That perception effect, economists warn, can trigger a self-reinforcing feedback loop, where fear of higher prices leads consumers to spend sooner, further fueling short-term inflation.

The Cost to Consumers

The burden of tariffs has been shared between businesses and consumers, but households are now bearing the majority. LendingTree’s Budget Lab estimates that by mid-2025, about 70.5% of new tariffs were passed directly to consumers, translating into an average $132 in extra annual spending per shopper.

Those added costs, though seemingly modest, compound rapidly when paired with rising credit card interest rates. “More Americans will have to rely on credit cards and personal loans to cover holiday expenses,” said Matt Schultz, LendingTree’s chief consumer finance analyst. “That’s the unfortunate reality many families will face this season.”

The impact will be especially visible in seasonal imports such as artificial Christmas trees — nearly all sourced from China and heavily tariffed. LendingTree estimates that if the current duties had been in place during the 2024 holiday season, U.S. consumers would have spent an additional $40.6 billion in total holiday purchases.

Inflation’s Next Chapter

While economists do not expect a dramatic spike in overall inflation, the reemergence of tariff-related pressures threatens to keep price levels higher than they otherwise would be. This could complicate the Fed’s ability to steer inflation back toward its 2% target, a threshold the U.S. has remained above since March 2021.

The core takeaway, analysts say, is that tariffs — once viewed primarily as a trade policy issue — are now a direct consumer cost. Even as companies adjust supply chains and inventory strategies, the fallout will continue to shape price behavior, shopping habits, and sentiment well into 2026.

For households entering the holiday season, the message is clear: expect higher prices at the register and tighter margins on holiday budgets, as trade politics translate into tangible consumer pain.