Economic Research At The Sf Fed

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San Francisco, CA – November 24, 2025 – A groundbreaking series of studies from the Federal Reserve Bank of San Francisco (FRBSF) has unveiled a counterintuitive and complex relationship between tariffs and inflation, challenging... The research indicates that while tariffs can initially lead to a decrease in inflation, primarily by dampening aggregate demand, this effect is temporary, eventually giving way to a significant inflationary boost. This nuanced finding presents a formidable challenge for the Federal Reserve (FRBSF) in calibrating its monetary policy, requiring a delicate balance between addressing short-term disinflationary pressures and anticipating longer-term inflationary surges. The implications for the global financial markets and the broader economy are profound. As central banks worldwide grapple with persistent inflation and the potential for increased protectionist trade policies, the FRBSB's findings underscore the need for a more sophisticated understanding of how trade barriers propagate through the... The study suggests that policymakers must exercise extreme caution, as misinterpreting the temporal effects of tariffs could lead to inappropriate monetary responses, potentially exacerbating economic instability.

The core of the FRBSF's revelation stems from a working paper by Régis Barnichon and Aayush Singh, titled "What Is a Tariff Shock? Insights from 150 years of Tariff Policy." Their extensive historical analysis demonstrates that, immediately following the imposition of tariffs, economies tend to experience lower inflation, coupled with reduced economic activity and increased unemployment. This initial disinflationary phase is attributed to tariffs acting as an "aggregate demand shock" through two main channels: However, the studies meticulously detail a subsequent reversal. The initial disinflationary effect is transient, with inflation eventually surging. One FRBSF Economic Letter suggests that a 1% increase in tariffs leads to an initial decline of approximately 10 basis points in inflation, which then reverses to an increase of about 10 basis points...

This long-run inflationary impact aligns with traditional economic theory, where tariffs increase the cost of imported goods and production inputs, ultimately passing through to higher consumer prices as supply-side factors begin to dominate. The key players in this analysis are the FRBSF researchers, with the Federal Reserve (US: FED) standing as the primary stakeholder whose policy decisions are directly impacted. The dual impact of tariffs outlined by the FRBSF study creates a complex landscape for public companies (US: PUBCO). In the short term, the demand-dampening effects could hurt a wide array of businesses, particularly those reliant on consumer spending and investment. Companies heavily involved in international trade, such as multinational manufacturers and retailers, could face reduced sales volumes and increased inventory challenges as demand shrinks. Economist Steve Moore joins ‘Varney & Co.’ to unpack President Donald Trump’s proposed tariff checks and warns the White House against fueling inflation.

A new analysis from the Federal Reserve Bank of San Francisco examined the impact of tariffs on the economy based on historical examples, finding that the effect of import taxes on inflation and unemployment... The San Francisco Fed on Monday published an economic letter by senior policy advisor Oscar Jorda and Vice President Fernanda Nechio, both of the San Francisco Fed's Economic Research Department, that used data from... "Tariffs can affect supply chains, investment, and firms' output costs, resulting in supply-side effects such as higher inflation and higher unemployment," the economists wrote. "However, tariffs can also affect spending, the demand side of the economy. Weaker demand translates to higher unemployment but lower inflation." Tariffs are taxes on imported goods that are paid by the importer, who typically passes some or all of those higher costs on to consumers through higher prices.

(Qian Weizhong/VCG via Getty Images) This interactive tool gives you the ability to explore, analyze, and download detailed data related to the Federal Reserve’s dual mandate of price stability and full employment. Dive into what is driving current inflation or explore how the labor market is working for various groups of people in the U.S. Use the Data Explorer to discover your own insights. This starter guide introduces some of the functionality of the SF Fed Data Explorer by illustrating how to chart a key indicator of labor market health, the unemployment rate. Request 30 days free access to exclusive, behind-the-scenes reporting on trade policy in the Trump era.

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Brief summaries of SF Fed economic research that explain in reader-friendly terms what our work means for the people we serve. Naomi Halbersleben, Oscar Jorda, Fernanda Nechio The United States announced new, higher tariff rates this year. Tariffs can affect supply chains, investment, and firms’ input costs, resulting in supply-side effects such as higher inflation and higher unemployment. However, tariffs can also affect spending, the demand side of the economy. Weaker demand translates to higher unemployment but lower inflation.

Estimates using 40 years of international data show that, following a change in tariffs, initially the unemployment rate increases and inflation declines. Over time, however, the unemployment rate returns to normal levels while inflation increases. Naomi Halbersleben, Oscar Jorda, Fernanda Nechio Greeshma Avaradi, Stephie Fried, Toby Graf, Marianna Kudlyak, Brandon Miskanic An official website of the United States Government Official websites use .govA .gov website belongs to an official government organization in the United States.

Secure .gov websites use HTTPSA lock (LockLocked padlock icon) or https:// means you've safely connected to the .gov website. Share sensitive information only on official, secure websites. The Federal Reserve, the central bank of the United States, provides the nation with a safe, flexible, and stable monetary and financial system. Review of Monetary Policy Strategy, Tools, and Communications An official website of the United States Government Official websites use .govA .gov website belongs to an official government organization in the United States.

Secure .gov websites use HTTPSA lock (LockLocked padlock icon) or https:// means you've safely connected to the .gov website. Share sensitive information only on official, secure websites. The Federal Reserve, the central bank of the United States, provides the nation with a safe, flexible, and stable monetary and financial system. Review of Monetary Policy Strategy, Tools, and Communications

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