Recent analysis by the New York Federal Reserve indicates that a significant number of companies have transferred at least a portion of the tariff costs, imposed by President Donald Trump, onto their customers. This trend highlights the increasing evidence that these tariffs could soon affect consumer spending.
A survey conducted by the New York Fed revealed that in May, approximately 77% of service industries impacted by rising costs due to increased tariffs passed some of those costs onto their clients. Similarly, about 75% of manufacturers reported doing the same.
According to the statistics from the New York Fed, over 30% of manufacturers and nearly 45% of service firms passed the entirety of their increased costs onto consumers. The survey noted that price increases were implemented rapidly after Trump’s recent imposition of tariffs. More than 35% of manufacturers and close to 40% of service companies raised their prices within a week of experiencing tariff-related cost hikes.
In early April, Trump announced plans to impose “reciprocal” tariffs on over 180 countries and regions, causing a significant downturn in the stock market. Shortly after, he deferred or suspended these tariffs for three months, allowing the equity market to recover most of its initial losses.
July deadline
Attention now shifts to a July 9 deadline when these suspended tariffs are expected to be reinstated, contributing to ongoing uncertainty in trade policy. Meanwhile, the U.S. has established one trade agreement with the United Kingdom, and Deputy Treasury Secretary Michael Faulkender indicated that the administration is nearing completion on additional agreements.
This recent survey from the New York Fed adds to a growing collection of data suggesting that companies are willing to pass on cost increases to consumers, despite Trump’s pressure to refrain from doing so.
A separate survey conducted in May showed that nearly 90% of the 300 CEOs questioned reported having raised or planning to raise prices, as revealed by data from Chief Executive Group and AlixPartners. Approximately 70% of these executives indicated plans to increase prices by at least 2.5%.
In light of Trump’s policies on trade, corporate leaders have adopted a cautious approach in their public comments to avoid potential backlash from the administration. For instance, last month, Trump cautioned Walmart through social media to “absorb the tariffs,” stating he would be closely monitoring the company.
Consequently, feedback from industry leaders points to a disparity between public statements and the private concerns expressed regarding tariffs. One respondent from the Institute for Supply Management’s manufacturing survey mentioned that “the administration’s tariffs have caused supply chain disturbances that rival those caused by Covid-19.” Another participant commented on the chaotic market conditions, expressing concern over their implications for pricing strategies.
‘Hugely distracting’
“We are currently engaged in extensive contingency planning, which is immensely distracting from our strategic initiatives,” one anonymous respondent commented. “Determining which plans are actionable is also very challenging.”
Similar themes emerged in the recent ISM service sector survey, released on Wednesday, highlighting the confusion and challenges posed by the tariffs. One participant stated, “Tariffs present an ongoing challenge due to the uncertainty surrounding applicable duties,” and suggested that delaying purchase decisions where feasible is the best course of action.
