Tariffs are resetting inflation expectations: Businesses expect to raise prices faster as a result of the import fees and consumers foresee paying more when they shop, according to two surveys released this week.
A report from the Federal Reserve Bank of Atlanta finds that U.S. companies on average expect to raise prices by 3.5% in the coming 12 months, an increase from their 2.5% expectation late in 2024, a time when inflationary pressures were easing. Companies directly impacted by tariffs expect to raise prices the most, but other firms also see an opportunity to raise prices, knowing that tariff-exposed competitors will be raising theirs, the report says.
“Certainly, prices are being affected,” says John Wiborg, president and CEO of Tacoma, Washington-based MRO distributor Stellar Industrial Supply Inc. “Our suppliers are handling tariffs in various ways; some are doing it better than others.”
Beyond the impact of price increases on customers, Wiborg says shifting government policies introduce uncertainty.
“Customers are always sensitive to any price increases, for any reason. They need to see high value from their suppliers,” he says. “The biggest effect so far, in my view, is that the uncertainty is raising the perception of risk and thus slowing all decisions.”
Consumers also are expecting tariffs to result in higher prices, according to the August Consumer Confidence Index report from the Conference Board, a business membership and research organization. Shoppers surveyed this month expect prices to be 6.2% higher a year from now, up from 5.7% in July but lower than the April peak of 7.0%.
“Consumers’ write-in responses showed that references to tariffs increased somewhat and continued to be associated with concerns about higher price, says Stephanie Guichard, senior economist, Global Indicators, at The Conference Board. “Meanwhile, references to high prices and inflation, including food and groceries, rose again in August.”
Tariffs could lead to broad price increases
The Atlanta Fed report showed that among goods-producing companies, the primary suppliers to distributors, there was not a great difference in expected price increases between those that import a lot of goods and thus pay the higher tariffs imposed by the Trump administration, and those that don’t.
The report says that suggests companies not facing higher tariff-related costs “anticipate having some additional pricing power due to their competitors likely passing on increased tariff duties to their customers.” The report is based on the monthly Survey of Business Uncertainty, which queries some 900 nonagricultural firms in a variety of industries.
Companies that make goods are more likely to rely on imports than service companies. 73.8% of goods makers import goods, with imports averaging 16.3% of inputs, versus 39.6% of service-producing firms importing with an average of 9.7% of inputs.
Import share of inputs varies widely by industry. Among the categories most exposed to imports, and thus tariffs, are medicinal and botanical manufacturing (57.5% of inputs), computer and peripheral manufacturing (42.2%) and jewelry and silverware manufacturing (34.9%). Among those least exposed are forestry and logging (0.7%), tenant-occupied housing (0.69%) and motor home manufacturing (1.4%).
The Atlanta Fed report concludes that the likelihood of many companies raising prices, whether or not they are directly impacted by tariffs, points to a broad increase in prices ahead.
“Our evidence suggests that, on net, we are likely to see a broadening and intensifying inflationary impulse because entire industries are raising prices,” the report says. “Firms can pass tariffs on to customers without losing too much share because their competitors are doing the same.”
