Nice roundup on political economy and geoeconomics from Council on Foreign Relations.
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According to the Yale Budget Lab, the pass-through of tariff costs to U.S. consumers has increased over time. By the end of 2025, it was about 76 percent, and as high as 100 percent for many consumer durables. At his press conference on March 18, Fed Chair Jay Powell said that tariffs were adding between half a percent and three quarters of a percent to the inflation rate. This accounts for much of the Fed’s overshoot of its 2 percent Personal Consumption Expenditures (PCE) inflation target. Estimated using another standard inflation metric—the Consumer Price Index (CPI)—the tariff contribution is slightly higher, averaging 0.87 percentage points in February.
Opinion polls consistently show voters rank affordability as a top concern, while CFR’s own research found that Americans are increasingly linking tariffs to affordability. Given the certain salience of the issue for November’s midterm elections, we expect Trump to issue new tariff exemptions for popular consumer goods and their raw-material components. This will allow him to tamp down prices without having to acknowledge the lack of progress in using tariffs to reshore manufacturing.
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See also commentary by Inu Manak, Edward Alden, and Michael Werz.