How Much Do Tariffs Affect Inflation?

Today’s political discussions can be frustrating and unhelpful, in large part because people disagree about what the “facts” of any subject are, beyond the “normal” problem of post-modern rejection of the notion of any such thing as absolute truth. 

Consider the matter of the impact of tariffs on general rates of inflation. In principle, tariffs can result in a one-time increase in prices, but not inflation (a general rise in prices for all goods and services). 

If there are any facts we might not generally disagree about, it is that inflation pressures exist, and have existed for some time. 

The bulk (80 percent to 90 percent) of total inflationary price increases, especially in key areas such as housing, health care, childcare, food and energy, occurred after 2017, but were caused by non-trade shocks. COVID-19 added 10 percent to 15 percent price increases across the economy by 2022, for example.

Other areas where consumers see higher prices are essentially insulating from tariffs, such as child care and healthcare (70 percent or more of costs are entirely domestic). 

Food and energy imports did face tariffs but were dwarfed by global events. Pandemic meatpacking disruptions in 2020 caused at least a 10 percent spike. ) The avian flu (2022-2023) explains 70 percent of rise in egg and chicken prices.  Also, imported food tariffs affected about five percent of U.S. food supply items.

Sector	Pre-Tariff Increase (2016-2017 to End-2017)	Post-Tariff Increase (End-2017 to End-2024)	Total Increase (2016-2024)	Non-Tariff Drivers
Housing (Shelter CPI)	+3.3%	+29.5%	+33.5%	Driven by low inventory (U.S. built 5M fewer homes than needed post-2008) and rent controls in high-demand areas; tariffs on lumber/steel added ~1-2% at most.
Food (Food at Home CPI)	+0.8%	+26.2%	+27.1%	Pandemic meatpacking disruptions (2020: +10% YoY) and avian flu (2022-2023) explain 70%+ of rise; imported food tariffs minimal (~5% of U.S. supply).
Healthcare (Medical Care CPI)	+2.1%	+22.4%	+24.7%	Prescription drug prices up 15% pre-2018 due to patent protections; hospital consolidations added 5-7% annually. Tariffs irrelevant to domestic services.
Child Care (Avg. Annual Cost)	+3.0% (est. from 2016 baseline ~$10,000)	+31.3% (to $13,128 in 2024)	+34.6%	Post-2020 wage hikes for providers (+25%) and 20% capacity loss from closures; exceeds general CPI by 10+ points, per DOL data. No direct tariff link.
Energy (Overall Energy CPI)	-2.5% (oil price dip)	+28.1%	+25.1%	2022 Ukraine war caused +50% gasoline spike; renewables transition volatility. Pre-2018 shale oversupply kept prices low; tariffs on imported oil negligible.

In sum, in each of these key consumer spending categories, there were other forces driving most of the price increases:  

• Housing: Chronic underbuilding since the 2008 financial crisis, zoning restrictions, and rising construction material/labor costs fueled by domestic shortages and low interest rates until 2022.

• Food: Supply chain disruptions (e.g., weather events, labor shortages), the COVID-19 pandemic's lasting effects on processing and transportation, and commodity price volatility from events like the 2022 Ukraine conflict.

• Healthcare: Aging population demands, regulatory complexities, pharmaceutical pricing dynamics, and insurance market consolidations—issues predating tariffs by decades.

• Child Care: Labor shortages in the sector (wages rose 20-30% post-2020 to attract workers), pandemic-related closures leading to reduced capacity, and insufficient public subsidies, with costs outpacing general inflation by 7 percentage points from 2020-2024.

• Energy: Geopolitical tensions (e.g., OPEC decisions pre-2018), the shale boom's volatility, and the 2020-2022 global energy crunch from pandemic recovery and the Russia-Ukraine war—notably, U.S. gasoline prices spiked 50%+ in 2022 before new 2025 tariffs.

Category	Pre-Tariff Increase (2012–2017 Annualized %)	Post-Tariff Increase (2018–Sep 2025 Annualized %)	Key Non-Tariff Drivers	Sources
Housing	+5.2% (FHFA HPI from ~250 to ~320 index)	+6.1% (to ~435 index; +70% cumulative since 2012)	Supply shortages, low rates, zoning	FHFA HPI; FRED USSTHPI
Food	+2.4% (CPI food from ~230 to ~250 index)	+3.8% (to ~290 index; +25% since 2019)	Pandemic disruptions, weather, labor	BLS CPI Food; USDA ERS Outlook
Healthcare	+3.1% (CPI medical care from ~430 to ~480 index)	+3.5% (to ~580 index; +35% since 2010)	Aging population, drug costs, consolidation	BLS CPI Medical Care; US Inflation Calculator
Child Care	+4.1% (Costs up ~25% from ~$9K to ~$11K avg annual/infant)	+5.3% (to ~$15K avg; +67% since 2010)	Provider wages, regulations, demand	EPI Child Care Costs; Living Wage Institute
Energy	+ (-1.2)% (CPI energy volatile, net flat from ~200 to ~195 index)	+2.9% (to ~270 index; +39% since 2019)	Geopolitics, AI demand, grid delays	BLS CPI Energy; BLS CPI Summary

Some point out that only about 20 percent of tariff costs show up in consumer prices, which might still be seen as important, even if the main drivers lie elsewhere:

• Shelter costs have risen close to 34 percent since 2019, outpacing household income growth by more than 12 percentage points

• Egg and beef prices are higher, yes. But in most years, ranchers struggle to earn a profit; the cattle herd shrank and we had a drought in 2022

• Avian flu wiped out millions of hens, quadrupling egg prices overnight

• Child-care costs have risen 10 points faster than overall inflation, driven by rising wages and shifts in the labor market.

Paradoxically, in the sectors where tariffs are in place (cars, bicycles, and washing machines), prices have risen less than overall inflation because durable goods companies compete fiercely for market share and absorb most of the tariff costs rather than passing them on to consumers. 

A Stunning "Controlled Experiment" Shows How Hard "Good Public Policy" Can Be

Students of the effectiveness of public policy might agree, if they thought about it, that we rarely have any way of assessing the effectiveness of policies we devise to solve stated problems, such as protecting students and teachers from Covid infections, for example. 

But sometimes we accidentally do find the closest proxy to a controlled experiment that we are ever likely to find in real life. 

During the COVID-19 pandemic, particularly in the 2020-2021 school year when many public schools in the United States were closed or operating remotely due to lockdowns and health concerns, the majority of Catholic schools remained open for in-person or hybrid instruction. 

According to data from the National Catholic Educational Association, 92 percent of Catholic schools were offering full-time in-person or hybrid learning by early 2021, with most reopening in the fall of 2020 where local regulations permitted. 

This contrasted sharply with large public school districts in cities like New York, Los Angeles, and Chicago, which often stayed closed for the entire year. 

Regarding COVID-19 transmission, there were no reports of major widespread outbreaks or significant spikes in cases attributable to Catholic schools during this period. 

Multiple sources, including diocesan reports and analyses, indicate that infection rates in these open Catholic schools were generally low and comparable to or below community averages, thanks to rigorous health protocols. 

For instance, in the Archdiocese of Washington, officials reported in late 2020 that safety measures were effective even as regional cases rose, with no evidence of school-driven surges. 

Similarly, a 2023 analysis noted that Catholic schools maintained in-person learning without significant increases in infection rates, despite 17 percent of teachers being high-risk. 

Broader studies on school reopenings, such as those tracking U.S. districts in 2020-2021, found that in-person instruction in elementary and secondary settings (including private ones) did not lead to substantial community transmission when mitigation strategies were in place. While isolated cases occurred. Catholic schools were frequently highlighted as models for safe reopening, with no documented "major problems" like mass closures due to outbreaks. 

Title/Publication	URL	Publication Date
Why Catholic schools didn't fail while public ones did during COVID (New York Post)	New York Post	November 15, 2022
While public schools closed on fear and politics, Catholic schools opened on love and science (Washington Examiner)	Washington Examiner	June 28, 2023
Catholic Schools Have Stayed (Mostly) Open During The Pandemic (WGBH)	WGBH	February 25, 2021
COVID heroes: Catholic schools safely reopened (USA Today)	USA Today	February 12, 2021
COVID-19 cluster size and transmission rates in schools from ... (PMC)	NIH	N/A (academic study, circa 2022)
NCEA Releases 2020 - 2021 Data on State of Catholic Schools ... (NCEA)	NCEA	February 2021
ED624233 - Catholic School Enrollment Boomed during COVID ... (ERIC)	ERIC	2022
Analysis of Catholic School Reopening Plans in Fall 2020 (Digital Commons @ LMU)	Digital Commons	2021

It seems fairly obvious now, with our better understanding of Covid transmission, Covid vaccine effectiveness and lethality for people of different ages and health states, that the policies of closing public schools was a mistake. A rather big mistake.

Manufacturing Might be Growing Where We Do Not Expect

Manufacturing employment in the United States has surpassed its pre-Covid pandemic levels, the first time since the 1970s that the sector has regained all the jobs it lost in a recession. But the places where growth is happening have changed.

The manufacturing recovery has not reached the “Rust Belt” states of Pennsylvania, Ohio, Indiana, Illinois, Michigan, and Wisconsin. But states in the Sun Belt and Mountain West, such as Florida, Texas, and Utah, are well above pre-pandemic manufacturing employment.

The post-pandemic period also shifted manufacturing growth away from rural areas and towards small urban counties, which have become the sector’s primary drivers of job creation.

Before COVID 19, large urban and suburban counties enjoyed the fastest manufacturing jobs growth.  Since 2019, small urban counties have become dominant in manufacturing job creation. 

These areas, which previously accounted for less than 20 percent of new manufacturing jobs in the four years before the pandemic, have accounted for 61 percent of all manufacturing jobs added from 2019 to 2023, according to Bureau of Labor Statistics data. 

source: Economic Innovation Group

And what seems clear is that although most manufacturing industries have recovered from their pandemic job losses, computer and electronics manufacturing and chemical manufacturing are growing faster than before the pandemic.

The new jobs increasingly feature higher-skill roles, have grown most in small urban counties and seem to feature more contingent labor (contractors rather than employees). 

Change	Pre-Covid	Post-Covid
Automation/Digitalization	Gradual, uneven	Rapid, industry-wide
Workforce skill requirements	More low-skill jobs	Shift to high-skill roles
Supply chain strategy	Cost-driven, global	Resiliency, domestic focus
Growth Patterns	Rural & urban	Mostly small urban counties
Job Structure	More permanent	More temp/contract work
Government/Private Investment	Limited	Massive new investment

For economic development advocates, perhaps a takeaway is the growing importance of electronics and computer manufacturing, which seems to be growing faster and perhaps in locations one might not expect, especially smaller urban areas.