By Hakan Yilmazkuday

This paper investigates the heterogeneous effects of U.S. tariffs on inflation across socio-demographic groups, utilizing a structural vector autoregression model that controls for oil prices, output growth, policy rates, and exchange rates. The aggregate tariff pass-through to inflation is estimated at 0.51, with tariffs accounting for approximately 17% of overall inflation volatility. Disaggregated analysis reveals significant variation, where tariff pass-through ranges from 0.38 to 0.55 across income percentiles, with higher income groups experiencing greater pass-through and a larger contribution of tariffs to inflation volatility ranging from 11% to 20%. Occupationally, armed forces personnel experience the highest pass-through (0.61), while students experience the lowest (0.45). The contribution of tariffs to the volatility of inflation is the highest for armed forces (19%), followed by disabled and retired people (18%). Among racial groups, Native Americans experience the highest pass-through (0.55), whereas the unclassified race experience the lowest (0.44). Age-specific analysis indicates a peak pass-through of 0.53 for individuals aged 25-34, and a minimum of 0.46 for those aged 75 and over. These findings are followed by specific policy suggestions to mitigate the unequal effects of tariffs on inflation across socio-demographic groups.

Source SSRN