ICYMI: NY Fed survey found most firms passed through tariffs to their customers

The New York Fed conducted a survey on tariffs passthrough. They found that “most businesses passed on at least some of the higher
tariffs to their customers, with nearly a third of manufacturers and
about 45 percent of service firms fully passing along all tariff-induced
cost increases by raising their prices.”

One caveat is that the survey was conducted between May 2 and May 9 before tariff hikes on goods from China were reduced from 145 percent to 30 percent.

They also found that “price increases happened rapidly: over half of both manufacturers and
service firms said they raised prices within a month of experiencing
tariff-related cost increases—many within a day or week.”

The most concerning finding was that “a significant share of businesses also reported raising
the selling prices of their goods and services unaffected by tariffs.
Many businesses indicated they increased prices to cover other rising
costs such as wages and insurance, though it is possible that in some
cases, businesses were taking advantage of an escalating pricing
environment to increase prices.”

The recent US PMIs showed inflationary pressures increasing which could result in higher CPI readings in the next months.

For the Fed it’s a tricky situation because it might be true that tariffs are a one-off price increase and they are focused on the trend instead. But if they start to ease with the tax cuts and deregulation ahead, the price increase could become embedded and the return to the 2% target could become even more difficult (especially considering that we’ve been above target for 5 years).

Here you can find the NY Fed survey

This article was written by Giuseppe Dellamotta at www.forexlive.com.