Many American consumers have been bracing for President Donald Trump’s tariffs to spark a dramatic surge in consumer prices, pushing the inflation rate into the danger zone.
They’re still waiting.
The annual inflation rate lingered at 2.7% in December, capping a year that saw the metric float between 2% and 3%.
Prices are rising. But many Americans expected tariffs to push inflation much higher.
“It’s a good news story that the economic impact of tariffs is smaller than it seemed like it might be,” said Bill Adams, chief economist of Comerica Bank, speaking to USA TODAY in December.
Back in May, consumers surveyed by the University of Michigan predicted prices would rise 6.6% over the next year.
Businesses surveyed by the Federal Reserve Bank of Philadelphia in the third quarter of 2025 predicted prices would rise 4.7% in the coming year.
Those dire predictions hinged on tariffs. Tariffs are taxes, and businesses generally pass at least part of their cost to consumers.
When Trump unveiled sweeping tariffs in April, many business leaders braced for a punishing wave of inflation.
“The magnitude and speed at which these prices are coming to us is somewhat unprecedented in history,” said John David Rainey, chief financial officer of Walmart, speaking to The Wall Street Journal in May.
Nearly a year later, tariffs have exacted a significant cost on American families.
Trump’s tariffs equated to a tax increase of $1,000 per household in 2025, according to a Feb. 6 report from the nonpartisan Tax Foundation. They’ll cost each household another $1,300 in 2026.
The Trump tariffs are the largest tax increase since 1993, according to the Tax Foundation analysis.
Despite those costs, the much-feared tariff inflation crisis hasn’t arrived, and perhaps it never will.
In a Dec. 10 news conference, Federal Reserve Chair Jerome Powell suggested the United States has little to fear from tariff inflation in the months to come.
Tariff-related inflation should peak in early 2026, Powell said. And the effect “shouldn’t be big,” he said. “It should be a couple tenths” of a percentage point, “or even less than that.”
In other words, the Fed chair expects tariffs to barely register in consumer prices in 2026.
A 3% inflation rate isn’t great. The Fed aims for an inflation target of 2%. But neither is it particularly bad. When policymakers speak of an inflation “crisis,” economists say, they’re usually talking about an annual rate of 5% to 10% or higher.
Is an inflation crisis still possible? How much have tariffs raised prices already? Will tariffs cause more inflation in 2026? Why didn’t they cause more inflation in 2025?
Let’s take those questions in turn.
When it comes to inflation, anything is always possible. Yet, at this point, few observers expect a spike in consumer prices in 2026.
Consumers have calmed their worst inflation fears. The typical shopper now expects prices to rise 3.1% over the next year, according to a January survey by the New York Fed.
Economists expect inflation to drift down to 2.6% in 2026, according to a November poll by the National Association for Business Economics.
Most economists never feared an inflation crisis. In April, at the peak of the tariff wars, the same NABE survey forecast inflation would reach a comparatively modest 3.4% by the end of 2025.
Today, most forecasts range lower.
“The recent run of figures suggests inflation has peaked,” said Michael Pearce, chief U.S. economist at Oxford Economics, speaking in January.
Through late 2025, tariffs added about 0.7 percentage points to the U.S. inflation rate, according to a November paper published by the National Bureau of Economic Research.
Without tariffs, in other words, those late-2025 inflation rates would have been closer to 2% than 3%.
“That’s a pretty big difference,” said Alex Jacquez, chief of policy and advocacy at the left-leaning Groundwork Collaborative nonprofit, speaking to USA TODAY in December.
Many forecasts suggest tariffs will continue to raise prices through the first months of 2026 – but not by much.
Powell, the Fed chair, told reporters on Dec. 10 that he expects tariff inflation to peak “in the first quarter or so” of 2026, with little further impact on the inflation rate.
Some other economists concur.
“Inflation from tariffs is still working its way through the supply chain,” said Adams of Comerica Bank. “And that process is likely to finish reaching the consumer in the first half of 2026.”
Yet, Adams predicts the inflation rate “will hold steady around 3%” during those months.
Other forecasters warn, however, that the tariff effect is far from over.
“Company after company is telling us that they are absorbing most of the price shock from imports still,” said Chris Rupkey, chief economist at FwdBonds, speaking to USA TODAY in December. “But 2026 could be a different story.”
Some of the dire predictions about tariffs and inflation assumed American consumers would bear the brunt of those taxes.
That didn’t happen. Only about 20% of Trump’s tariffs “passed through” to consumers, according to the study from the National Bureau of Economic Research.
As imported products passed from their country of origin to American retailers to consumers, their impact softened at every stop.
Exporters accepted lower prices for products they sold to American manufacturers and merchants, Adams said. China’s economy weakened, he said, pushing down prices for Chinese exports.
American retailers, for their part, “have been either unable or unwilling to pass on the full costs of tariffs to consumers,” said Jacquez of Groundwork Collaborative, partly from concern about losing their business. Some firms sought cheaper versions of the same products from countries with lower tariffs.
Lastly, Trump rolled back some of his own tariffs, blunting their impact on consumers.
Between carve-outs, trade deals and other exclusions, Politico reports, roughly half of all U.S. imports now enter the country tariff-free.