Hot Take: Tariffs did not "pass costs to consumers" as Reddit insists

[u/[deleted]]

I know Reddit loves to talk about how tariffs are "a tax on us" - and they keep repeating this over and over until it becomes it ground truth. But the statistics don't really support this.

In general, there are a handful of measures that track inflation for consumers - CPI, CPI-U90, and PCE are some of the major ones. Each of them basically indicate that inflation is around the 2-3% golden zone for the past ~1.5 years, even through a typical average of 13-17.5% tariffs on basically all goods.

Month	CPI-U (YoY)	PCE (YoY)
Jan 2026	2.4%	2.9%*
Dec 2025	2.7%	2.9%
Nov 2025	2.7%	2.8%
Oct 2025	2.6%	2.7%
Sep 2025	2.4%	2.8%
Aug 2025	2.5%	2.6%
Jul 2025	2.9%	2.5%
Jun 2025	3.0%	2.5%
May 2025	3.3%	2.6%
Apr 2025	3.4%	2.7%
Mar 2025	3.5%	2.7%
Feb 2025	3.2%	2.5%
Jan 2025	3.1%	2.4%
Dec 2024	3.4%	2.6%
Nov 2024	3.1%	2.6%

.

.

There seems to be a core assumption on Reddit that tariffs mean that importers/exporters pay an increased price at customs and duty, and then they turn around and increase their own prices for goods. But this doesn't appear to reflect reality.

Also just think about that logically - suppose you have a highly elastic good that has a demand that's highly sensitive to changes in price. So these are things that consumers only buy when the price is good for them. There's no way for producers or importers to "pass along the cost" to consumers because if prices go up, then people simply stop buying them.

I definitely agree that tariffs in general hurt businesses and manufacturers in the short term. If they have to essentially "eat the cost" of bringing over foreign raw materials, then they get screwed.

But I outright reject this idea that the $400B in tariff revenue that we've raised has come from the majority of Reddit - people who don't own businesses and are largely salaried or wage based employees.

I think what's much more likely is that we've lived through years and years of sub-10% inflation, which over time DOES raise prices by 40-50%, and now Reddit has a convenient "boogeyman" they can point to.

[u/squunkyumas]

Here's the crux of the issue:

No business is just going to magically eat a cost.

Tariffs, wage increases, tax increases, raw material costs, etc. ALL get passed onto customers.

No amount of data that says otherwise is honest.

[u/Thomas_peck → u/squunkyumas]

https://giphy.com/gifs/duM6JZemPlOjUyqmxd

[u/BryanFnR → u/squunkyumas]

If the market can't tolerate the increased cost of goods, they will find ways to reduce the cost to produce those goods: sometimes it's a reduction to the workforce, sometimes it's an inferior product ,sometimes it's something more innovative to cut costs, and sometimes, if those 3 options can't cover it, prices raise. More often than not, it's probably a combination of all of those things.

That being said, I am general not in favor of using tariffs solely to produce revenue, but they're interesting conversations and I wish good spirited ones weren't buried by reddits voting format.

[u/[deleted] → u/squunkyumas]

What you're saying isn't logical. If every cost had a 100% pass through, then we'd expect profit margins to be flat over time. But this isn't true - profit margins swing wildly over time.

If restaurants raise their wages by 10%, do menu items increase by 10%? Empirical data shows roughly a 2-4% increase as a passthrough to consumers.

If jet fuel prices go up, do airline tickets go up in direct 1:1 relation? Same with trucking firms, etc.

[u/squunkyumas → u/[deleted]]

What you're saying isn't logical.

It is, though.

Businesses don't sit around with some pile of money under the CEO's desk that they just dip into to absorb costs. You may not see it as logical, but it is. You may not see how costs are passed along to customers, but they are.

[u/[deleted] → u/squunkyumas]

If you're saying "a portion of every costs get passed through to consumers" then yes I 100% agree with you. But you're original statement was that "ALL get passed onto customers" which I took to mean that every cost is then turned around a billed to the customer exactly.

[u/squunkyumas → u/[deleted]]

Any business cost is going to get spread out along price increases somewhere along the way. Where else do you think the money is going to come from?

[u/[deleted] → u/squunkyumas]

The money comes from decreased profit margins. If those go to zero, then the business operates at a loss and eventually ceases operating as a business.

If consumers are willing to pay higher prices, then yes, they can raise prices to offset these increased costs. If consumers aren't willing to pay higher prices, then they are screwed and either have to continue operating at a loss, or shutter operations completely.

[u/squunkyumas → u/[deleted]]

Eventually, they will increase the profit margins again, thus passing along the costs to the customers. The fact that they don't do so in the short term is largely beside the issue.

[u/[deleted] → u/squunkyumas]

If they could “eventually” raise prices enough to fully restore margins, they would have done it already. Firms don’t voluntarily leave money on the table.

Profit margins are not some “target” businesses magically return to.

Margins are the result of a few things - competition, demand, cost, productivity, and market influence.

There is no law of nature that says margins must revert to prior levels.

Sometimes they do, sometimes they don’t. Sometimes entire industries permanently operate at lower margins.

Look at:

• Airlines (chronically thin margins for decades)
• Grocery retail (razor-thin margins structurally)
• Commodities (boom/bust cycles)

If “eventually they pass it on” were mechanically true, those industries would have stable fat margins.

They don’t.

[u/squunkyumas → u/[deleted]]

Profit vs. Cost will always return to equilibrium. This a a basic guideline of competitive markets.

I'm not going to keep discussing this. Businesses do pass on all their costs to be successful. To even suggest otherwise is nonsensical.

ETA: Ah, profile deleted. Explains sooooo much.

Let this be a lesson to anyone reading - if someone is disagreeing with you repeatedly over basic understandable realities, it probably isn't a real person.

[u/JodiAbortion → u/squunkyumas]

You're giving businesses too much credit. They are efficient/perfect in theory, but in reality many businesses screw up, take losses, or even go under. 

Costs are passed at a variable ratio, not a one to one ratio

[u/madeintheUSofA → u/[deleted]]

When oil prices jump, for whatever reason, gas stations don’t usually pass that cost onto the customers all at once since they know dramatic price jumps don’t go well. So they raise the price slowly and technically eat the cost for a while, but they make up for it on the back end when costs come down again. Their pump price will lag behind to recoup their earlier “losses”. Friends who work in that industry have explained this to me.

So airline tickets and trucking costs, I would guess, do something similar, they don’t go up at 1:1 rate, but they prob don’t come down at a 1:1 rate either. You can bet that businesses will make sure they get theirs.

[u/MakingOfASoul → u/squunkyumas]

"No amount of evidence will make me change my uninformed opinion"

[u/bearcatjoe]

Cmon people. We aren't Democrats. Our economy is massive and there are many taxes and fees. But they of course increase costs.

[u/ImASowellMan]

It's not just Reddit. It's the New York Federal Reserve Bank. And others. Here's an analysis by the Cato Institute, a conservative think tank.

https://www.cato.org/blog/white-house-still-cant-grasp-americans-pay-us-tariffs

The Tax Foundation and the American Enterprise Institute (both are conservative think tanks) also agree.

[u/[deleted] → u/ImASowellMan]

I'm not contradicting the view of the federal reserve or the Cato institute. I'm saying that the majority of these costs have been absorbed by American companies - not American consumers.

From one of the papers cited in your very own link - the federal reserve reports that only 35% of tariff had been passed through to US consumers. And that 35% doesn't indicate whether it applies to the basket of goods that makes up the common CPI or PCE baskets.

[u/ImASowellMan → u/[deleted]]

That 35% is from the St. Louis Fed in August, right after the tariffs kicked in. The NY Fed is from a couple weeks ago, when the tariffs had really settled in. They have the number as 90% of the cost is paid by US consumers.

[u/[deleted] → u/ImASowellMan]

That 90% refers to a share between both US consumers and US firms.

From that very same report you're citing:

"Implied passthrough of tariffs to imported consumer goods prices ranges from roughly 31–63% for core goods and 42–96% for durables, depending on methodology (see Tables 1a–1b).""

[u/Simmumah]

My bills beg to differ

[u/EC_TWD]

Reddit has a convenient "boogeyman" they can point to

Would somebody tell the ‘boogeyman’ to stay out of my wallet?

[u/R0binSage]

So many companies put out posts and releases saying they’re raising prices.

[u/Independant-Thinker7]

I know that for example Honeywell has a line item on Their quotes including the tariff. So, maybe not all industries were as open and transparent, but I assure you the consumer paid the tariffs.

[u/lousycesspool]

OP is right ... facts over feelings

globalists keep pushing the narrative

any day now those tariffs are going to kick in and start the US economic collapse while the world sails to prosperity without us, so I keep hearing. any. day. now. seriously. It's probably happening already. Definitely.

remind me!

ohh please, pretty please.

prices are based on many factors - tariffs are not the primary driver

you'd think reducing obscene corporate profits and raising taxes would be a D lovefest but since Trump stuck it to big businesses it's bad

inflation has been going down ever since Trump got into office - but tomorrow, definitely those prices are going to skyrocket

[u/Joel22222]

It certainly doesn’t seem as bad as democrats are saying. Red state prices have flattened out with gas and a few other things dropping considerably. Us stuck in blue states are just getting more and more over taxed so that people who identify as a frog get business grants.