According to a recent survey from the Federal Reserve, businesses throughout the economy are transferring the higher input costs resulting from tariffs onto consumers by raising prices.
Every company across the Fed’s 12 regional districts has noted increased expenses due to tariffs, prompting many to implement price hikes.
The Fed’s July Beige Book indicated, “Several companies have taken to passing increased costs onto consumers through price increases and added fees.”
For those businesses that opted not to pass costs onto customers, the focus has shifted toward understanding “increased price sensitivity” among consumers.
Inflation, tracked by the Labor Department’s Consumer Price Index (CPI), saw an uptick in June, partly attributed to tariffs.
Yearly inflation rose to 2.7% in June, up from 2.4% in May and 2.3% in April.
This aligns with expectations, as many economists believe inflation from tariffs will rise during the summer after stocks from wholesale purchases made prior to the tariffs are depleted.
Fitch’s ratings recently indicated that the overall US tariff rate has reached 14.1%, the highest in decades.
President Trump imposed a general 10% tariff, alongside specific tariffs aimed at China, targeting individual goods. However, negotiations have led to a suspension of these specific tariffs until August 1st.
In June, import prices inched up by 0.1%, showing a 0.2% decrease compared to last year, as reported by the Labor Department on Thursday.
This figure fell short of economists’ predictions, influenced by a drop in energy prices.
Fuel import prices decreased by 0.7% last month after a 5% decline the previous month, largely due to rising tensions in the Middle East. At that point, West Texas Intermediate crude had dropped by more than 10%.
Meanwhile, imports of fuel and food rose by 0.2% in June, following a 0.1% increase in May.
The US dollar has also lost value against other currencies, declining roughly 9% since the start of the year amidst Trump’s trade war.
Economists suggest that a weaker dollar can fuel inflation.
“Since the onset of tariffs under the Trump administration, the dollar has depreciated, which may lead to a greater transfer of tariff costs to consumer prices,” noted Michael Pierce, deputy chief economist at Oxford Economics. “A weaker dollar enhances the likelihood that businesses will pass on more of the tariff costs.”
