SF Fed Tariff Inflation Research: The Counterintuitive Link to Lower Prices

It's the ultimate economic paradox. While conventional wisdom says trade barriers spike costs, new San Francisco Fed research suggests tariffs might actually cool down inflation under specific economic conditions.

SF Fed Tariff Inflation Research Challenges Economic Dogma

According to Reuters, the study indicates that tariffs don't always translate to higher consumer prices. Instead of a direct pass-through, the research highlights how trade barriers can trigger supply chain substitutions and shift corporate profit margins in ways that mitigate upward price pressure.

Supply Chain Shifts and Price Elasticity

The researchers found that when faced with tariffs, companies often opt to diversify their suppliers or absorb costs to maintain market share rather than raising prices for consumers. In the trade landscape of 2026, this 'supply chain resilience' has become a critical buffer against inflationary shocks.