Business expect to pass through roughly half of tariff-related expenses to US consumers still reeling from the pandemic-era inflation surge, according to a new survey from the Federal Reserve Bank of Atlanta.
The findings show that many businesses anticipate they’ll need to take a different approach from 2018, when they passed through nearly all tariff-related costs to their customers, Atlanta Fed researchers wrote in a blog post published Thursday.
“Our results suggest many firms believe their customers are price-sensitive enough this time around (perhaps owing to the recent inflationary surge that isn’t too far in the rearview mirror) that they cannot pass through the entire cost increase without reducing demand,” wrote Atlanta Fed researchers Kevin Foster, Aaron Jalca and Brent Meyer.
Businesses were asked to estimate what portion of higher tariff costs they would be able to pass along to customers based on current levels of demand. Those businesses that reported stronger demand levels said they expect to pass through a greater share of costs than than businesses facing weaker sales, according to the survey, which was conducted April 7 through April 18.
During the survey period, President Donald Trump had put in place a 10% baseline tariff for almost all countries and a 25% tariff on all foreign-made autos and auto parts. China and the European Union faced significantly higher tariffs at that time.
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