Economy

How Trump’s Tariffs Could Hike Prices, Strain Wallets This Holiday Season

Trump’s tariffs are expected to hike consumer prices, especially during the holidays, fueling inflation and impacting spending.

byEditorial Staff

October 31, 2025, 4:13 PM

Two women in coats walking away on a city street, carrying multiple shopping bags in their hands.

Close-up of two female friends walking on a cobbled street, carrying Christmas shopping bags. By Inside Creative House / Shutterstock.com

Executive Summary

Tariffs initiated by President Donald Trump are projected to significantly impact consumer prices, particularly during the upcoming holiday shopping season, as companies increasingly pass costs onto consumers.

Economists anticipate these tariffs could add approximately half a percentage point to the core Personal Consumption Expenditures (PCE) measure, complicating the Federal Reserve’s efforts to meet its 2% inflation target.

Consumers are estimated to bear 50% to 70% of the total tariff costs, potentially leading to higher prices for various goods and an additional $40.6 billion in holiday spending costs, possibly increasing reliance on credit.

The Story So Far

Tariffs initiated by President Donald Trump are now expected to increasingly pass from businesses to consumers, leading to higher prices for various goods and contributing to sustained inflation. This projected increase in the core Personal Consumption Expenditures (PCE) measure, a key inflation indicator for the Federal Reserve, is a significant concern for the central bank as it aims to maintain a 2% inflation target.

Why This Matters

Tariffs initiated by President Trump are now increasingly being passed on to consumers, leading to higher prices for various goods and a projected strain on holiday shopping budgets, with analysts anticipating an average additional cost of $132 per shopper if current duties apply to the 2024 season. This inflationary pressure is also expected to add approximately half a percentage point to the core Personal Consumption Expenditures (PCE) measure, complicating the Federal Reserve’s efforts to meet its 2% inflation target and influencing future interest rate decisions. Consequently, households may face increased reliance on credit to cover gift-buying expenses, impacting overall consumer spending and credit usage.

Who Thinks What?

Economists from Bank of America, TD Cowen, and LendingTree project that tariffs initiated by President Donald Trump will significantly increase consumer prices, adding approximately half a percentage point to core inflation and passing 50% to 70% of costs to consumers, especially impacting the holiday shopping season and potentially straining household budgets.

The Federal Reserve, including Chair Jerome Powell, views the tariffs as a contributing factor to persistent inflation, making it harder to achieve their 2% target for core inflation and influencing their policy decisions.

Tariffs initiated by President Donald Trump are projected to significantly impact consumer prices, with economists anticipating a more pronounced effect on the upcoming holiday shopping season. While companies have largely absorbed these costs earlier in the year through inventory build-up and compressed profit margins, analysts now expect these duties will increasingly pass through to consumers, contributing to sustained inflation.

Economic Projections and Federal Reserve Concerns

Bank of America (BofA) economists anticipate that tariffs will add approximately half a percentage point to the core Personal Consumption Expenditures (PCE) measure, which the Federal Reserve utilizes to assess inflation. According to BofA estimates, this would place the September inflation rate at 2.9% with tariffs, compared to an estimated 2.4% without them. These figures align with similar observations recently cited by Fed Chair Jerome Powell.

The Federal Reserve aims to maintain core inflation, excluding food and energy, at 2%, a target it has exceeded since March 2021. The difference of half a percentage point is critical for the central bank’s policy decisions. This persistent inflationary pressure has led to differing opinions within the Fed, with two regional presidents dissenting from a recent decision to lower the key interest rate.

Consumer Impact at the Register

Consumers are estimated to bear 50% to 70% of the total tariff costs, with businesses absorbing the remainder. This burden translates to higher prices for various goods, including coffee, furniture, and clothing, which saw a 0.7% price jump in September, according to the Bureau of Labor Statistics.

Even for items that constitute minor components of price indexes, their impact on consumer perception can be substantial. TD Cowen analysts note that price increases in frequently purchased goods, like eggs or artificial Christmas trees, can create a “constant, tangible feedback loop” that shapes consumer confidence and perceptions of inflation, potentially leading to a self-reinforcing cycle of rising prices.

Holiday Season Outlook

Looking ahead, LendingTree estimates that if current duties were applied to the 2024 holiday season, shoppers would have faced an additional $40.6 billion in costs, averaging $132 per shopper. Their Budget Lab further projects that approximately 70.5% of new tariffs could be passed on to consumers by June 2025.

Matt Schultz, LendingTree’s chief consumer finance analyst, highlighted the potential strain on household budgets, stating that many Americans might need to rely on credit cards and personal loans to cover gift-buying expenses under such conditions. This underscores the significant financial implications tariffs could have on consumer spending and credit usage.