‘Sneakflation’: How Trump’s tariffs are gradually raising costs for American consumers
By Alicia Wallace, CNN
(CNN) — When tariffs are tacked on to many imported goods, someone’s got to foot the bill.
According to President Donald Trump, foreign countries and overseas businesses are eating the cost. But evidence shows that American consumers and businesses are paying for the tariffs the administration has implemented as its go-to policy levers.
“It been proven, that even at this late stage, Tariffs have not caused Inflation, or any other problems for America, other than massive amounts of CASH pouring into our Treasury’s coffers,” Trump posted on his social media site, Truth Social, earlier this month. “Also, it has been shown that, for the most part, Consumers aren’t even paying these Tariffs, it is mostly Companies and Governments, many of them Foreign, picking up the tabs.”
Trump’s post did not include any substantiation for his claims.
There is a growing field of evidence to the contrary: Economic data, academic research, businesses’ expenses, and people’s first-hand experiences are showing that it’s American firms and consumers who are seeing increasingly higher costs due to the tariffs.
That burden is expected to grow only heavier in the months — and, potentially, years — to come as more tariffs take effect, and others settle more deeply into supply chains.
What the latest data shows
If foreign exporters are absorbing tariff costs, one possible way to see that in US economic data is whether they’re lowering their pre-tariff export prices.
If that’s the case, it would show up as lower or falling US import prices.
Recent months’ data, however, has shown that import prices (which exclude the costs of tariffs, insurance and shipping costs) have held mostly steady. They’ve risen by 0.5% since the November election and by 0.2% since March, after which the bulk of new tariffs were announced, according to a recent note from Pantheon Macroeconomics.
“One argument that had looked plausible until recently was that import prices had been supported by pre-tariff stockpiling in [the last part of 2024 and the first three months of 2025], which saw goods imports soar to record highs,” Pantheon economists Samuel Tombs and Oliver Allen wrote in an August 19 note. “That left foreign exporters flush with orders, providing little incentive to cut pre-tariff prices to remain competitive. But import prices have remained resilient despite goods imports dropping back very sharply in [the second quarter], suggesting a steep decline in prices ahead is unlikely.”
A more granular look at import price data indicates that there’s a slight dip in import prices from China; however, for the vast majority of countries, it’s basically been flat, Olu Sonola, head of US economic research at Fitch Ratings, told CNN in an interview.
“So that’s telling you that all of that is paid by importers,” he said. “It’s now a question of, is it the manufacturer, is it the retailers, or is it the small business that’s bringing it in? They now have to figure out, ‘How much of this can I take on, and how much of this will I pass on?”
“It’s very likely they will pass the bulk of it on,” he added.
To this point, consumers have been mostly shielded from starkly higher prices.
Through June, US consumers had absorbed 22% of tariff costs, but that share was expected to rise to 67% by October, according to an August 10 estimation from Goldman Sachs economists. That assessment led to a demand from Trump that the investment giant fire its chief economist.
Goldman Sachs economists said they expect that about 70% of the direct costs of the tariffs will eventually fall on the consumer, and that the total could rise to 100% if including the spillover effects of domestic producers raising their prices (something that has already occurred and is expected to continue — more on that below).
There’s a laundry list of reasons why tariff-driven price hikes are a slow boil: Businesses loaded up their warehouses with pre-tariffed goods; higher costs have been split by entities along the supply chain, lessening the blow at the retail store; and Trump’s fits-and-starts approach to tariffs has meant that the bulk of them did not go into effect for months, and many items are exempted (for at least now).
At the same time, inflation has remained relatively tame for both good and not-so-good reasons: Ongoing deflationary trends in key areas, marking a continued unwinding from pandemic-era shortages and price spikes; falling gas prices (they’re down 9.5% from July of last year) amid global economic uncertainty; and then because of depressed consumer demand in areas such as travel.
Still, recent Consumer Price Index inflation reports reveal increases in the cost of certain imports the United States relies on heavily, including household furnishings, linens, tools, toys and sporting goods.
Slow-bleeding, tariff-driven ‘sneakflation’
As of August 8, imported goods cost 5% more than pre-tariff trends predicted and domestically produced goods are running 3% higher, according to newly released research from Harvard Business School professor Alberto Cavallo and colleagues.
Cavallo, in an interview with CNN, said he expects that the passthrough will continue in steady increments but could be limited in some cases depending on the competitiveness of the product category and industry.
“I think it could take over a year for us to see some of the effects of these tariffs,” he said. “But a year from now, maybe two years from now, we’ll notice that consumers ended up paying a significant amount of the tariffs even if they didn’t notice the increases right away.”
New research last week from the Federal Reserve Bank of Atlanta showed that businesses — those directly exposed to tariffs and those who are not — expect to raise prices this year.
At the end of 2024, surveyed businesses anticipated increasing their prices by 2.5% during the year ahead. By mid-May, those estimates shot up to 3.5%, according to the Atlanta Fed, which found that little difference existed in the price growth expectations of firms with or without foreign exposure.
However, the survey showed some starker increases expected among services, providing firms, which prompted questions around whether these price increases could deliver an inflationary impulse as was seen three years ago .
“The chief concern regarding the impact of tariffs is whether we will experience the same phenomenon that we witnessed during the pandemic. That is, will price pressures spread beyond only the prices that are directly affected by increased import duties?” Atlanta Fed researchers wrote in the report.
But in the coming months, the expectations are for the tariff passthrough to be gradual and drawn out, Matt Bush, a US economist at Guggenheim Investments, told CNN in an interview.
“Businesses say they’re working both with suppliers and consumers to help share some of the cost burden,” Bush said. “They do indicate that they’re willing to eat some of the cost for now. But I think as the realization sets in that these tariffs are not going back down, they will start to pass more on to consumers.”
The world’s largest retailer said as much on Thursday: Walmart CEO Doug McMillon said that the company’s costs have risen every week because of tariffs but will aim to keep prices down “for as long as we can.”
Small increases over time could make it easier for some consumers to handle; however, to others — especially those with little to no wiggle room in their budgets — that slow burn could very well feel like a slow bleed.
“Lower-income Americans are sadly adept at juggling their expenses and trying to make every dime count,” Heather Long, chief economist at Navy Federal Credit Union, wrote in an email to CNN. “They may go without meat or coffee one week in order to buy shoes for their kids. The next week, they may skip a car payment to cover their electric bill and a medical expense. It’s a constant juggle where they allocate money to their most urgent need at that moment.”
Retailers and major brands know that many Americans live paycheck to paycheck, so they’re using “sneakflation” to pass along the tariffs in small increments in hopes that consumers won’t notice or will be able to better absorb it, Long added.
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