Study: Tariffs Add $365 to Annual Costs for South Dakota Households

Written by Todd Epp - Northern Plains News LLC

Federal tariffs imposed in 2025 added seven-tenths of a percentage point to consumer inflation by September, increasing costs for South Dakota households already squeezed by sluggish economic growth, according to a National Bureau of Economic Research study released this month.

The tariffs raised prices on household furnishings by 6.7 percent, electronics and recreation items by 2.6 percent, and food products by 2.8 percent relative to pre-tariff trends, researchers Alberto Cavallo of Harvard University, Paola Llamas of Northwestern University, and Franco Vazquez of Universidad de San Andrés found in their analysis of 359,000 products from five major U.S. retailers.

South Dakota faces estimated additional import costs of $296 million to $370 million from the tariffs, according to Dakota Institute analysis published in May. With average household spending in South Dakota at $52,133 annually, the NBER study finding that tariffs contributed 0.7 percentage points to national inflation translates to roughly $365 in additional annual costs per household.

Imported goods rose 5.4 percent relative to pre-tariff trends between March and September, while domestic goods increased 3 percent as retailers passed along higher costs for imported components and reduced competitive pressure allowed price increases, the study found.

Cheaper varieties within product categories saw larger price increases than expensive goods, researchers found. Prices in the cheapest quartile rose 5 percent compared with 2.5 percent for the most expensive quartile, hitting lower-income households harder.

“When tariffs raise import costs, sellers of these low-markup goods appear to pass through a larger share of the cost increase, amplifying inflation for low-income households,” the researchers wrote.

The findings matter for South Dakota, where median household income ranks below the national average and rural communities face limited shopping options. The state economy grew just 0.4 percent in 2024, ranking 48th nationally, according to federal data.

Chinese goods, which supply 36 percent of products tracked in the study, experienced price increases of 4.6 percent relative to pre-tariff trends by September. Canadian goods rose 3.6 percent, while Mexican goods showed minimal increases due to USMCA trade agreement exemptions.

Coffee prices jumped 8.7 percent, reflecting 50 percent tariffs on Brazilian imports. Carpets and floor coverings surged 36 percent, while furniture and furnishings increased 5.8 percent, according to the study.

The study estimated retail tariff pass-through at 20 percent within six months, meaning a 20 percent tariff raised affected product prices by roughly 4 percent. Prices began rising within days of tariff announcements in March and continued climbing through September.

Without the tariffs, the national Consumer Price Index would have measured 2.2 percent annual inflation in August instead of the reported 2.9 percent, bringing inflation closer to the Federal Reserve 2 percent target, researchers calculated.

The analysis used daily price data from October 2024 through September 2025, matching products to tariff rates using artificial intelligence to identify countries of origin and trade classifications.

“Given the uncertainty surrounding the tariff announcements, our results suggest pass-through may continue to accumulate gradually over time, putting persistent upward pressure on inflation statistics,” the researchers concluded.

The full working paper is available at nber.org/papers/w34496.