Tariffs have a long tail

It’s been more than a year since the tariff war somehow managed to rope in a bunch of penguins, inspire the TACO trade, and send markets scrambling to price every policy twist.

So why should investors care about a study telling us now what tariffs did then? Because just like your package during the holidays, the bill can arrive late.

A new report from the New York Fed is finally putting a number on the price consumers paid: Tariffs pushed consumer-goods prices 2.9% higher by February than they otherwise would have been. Without the duties, prices would have actually fallen slightly.

The impact didn’t stop at the border. Roughly 26% of a tariff increase eventually makes its way into consumer-goods prices, with roughly one-third of the hit showing up in US-made goods. Domestic manufacturers paid more for imported materials, while some also gained room to raise prices when foreign competitors got more expensive. As it turns out, “Made in America” doesn’t necessarily mean tariff-proof.

Itemizing the receipt

While import prices react quickly, the effect on US-made goods can take nine to 12 months to work through supply chains—which is why the numbers matter now.

Once higher costs arrive, businesses have only a few options: raise prices and risk losing customers, absorb the hit and sacrifice margins, or cut costs somewhere else.

Ralph Lauren offered a glimpse into that trade-off earlier this year, warning that tariffs would shave its quarterly margins as higher import costs pushed through its supply chain. By the time it reported in May, tariffs were still weighing on profitability, even as revenue and earnings beat expectations. The company has responded by shifting sourcing and selectively raising prices.

Estée Lauder has faced an even more explicit hit, estimating that tariffs would cost roughly $100 million in annual profit back in Q2. Today, it’s still trying to protect margins with higher prices and more spending behind premium products.

Yet both companies have also posted solid results in recent quarters. While tariffs don’t usually ruin a quarter immediately, they do raise hurdles the rest of the business has to clear.

Late bills still need to be paid

The effects can last beyond a single earnings season. Companies are changing where they manufacture, source, and invest to reduce future tariff exposure, all while new tariffs are still entering the pipeline. Just see tariffs on Canadian goods, which took effect in August: The New York Fed expects their impact, plus a planned January increase in levies on Canadian autos, to inflate the cost of goods again by mid-2027.

So don’t be surprised next year if a company blames weaker margins on input costs, hikes prices on something made in America, or says customers are pushing back after another round of increases. Even if tariffs are old news, their bills are just beginning to come due.—HC