Productivity gains significantly reduced the inflationary effect of President Donald Trump’s 2025 tariffs, according to research from the Federal Reserve Bank of Boston. The study of 63 industries found that 37 recorded productivity gains, with economy-wide improvements lowering corporate production costs by about 1.3% and reducing core PCE inflation by roughly 0.9 percentage points. Tariffs increased U.S. domestic production costs by about 1.1% and, after accounting for directly imported goods and U.S.-made products using imported inputs, would have raised core PCE inflation by approximately 1.4 percentage points. After the productivity offset, the estimated net effect was about 0.5 percentage point. The findings suggest companies may absorb tariff costs through efficiency gains, investment, labor and capital reallocation, lower margins or market-share shifts rather than passing all costs to consumers. The Boston Fed’s estimate assumes full pass-through and may therefore exceed the actual impact for some firms, while the researchers caution that the simultaneous productivity gains and tariff exposure do not establish that tariffs caused the gains. With U.S. core PCE inflation at about 3% in 2025 and nominal wage growth contributing an estimated 1.9 percentage points, the research suggests tariffs were not the primary explanation for persistent above-target inflation. The conclusions contrast with New York Fed research that found stronger consumer-price pass-through and warned that more tariff-related inflation may still emerge.