Despite assurances from the White House that the cost of its varying tariff policies would be borne by companies, a study by the Federal Reserve Bank of New York appears to show it’s actually the consumers who are bearing the brunt of the policies, at least early on.
The study found that businesses have raised prices quickly in response to tariffs, though they only modestly cut headcount, according to a report from Bloomberg.
The report shows that roughly three-quarters of manufacturers and services firms in the district have passed on to consumers at least some of the higher costs they’ve faced due to tariffs according to the study, conducted across the district and released on Wednesday. Around a third of manufacturers and almost half of services firms said they had fully transferred their higher costs, according to Bloomberg.
“Interestingly, a significant share of businesses also reported raising the selling prices of their goods and services unaffected by tariffs,” researchers said. Companies hiked prices to cover rising wages and insurance costs, “though it is possible that in some cases, businesses were taking advantage of an escalating pricing environment to increase prices.”
The survey was conducted May 2-9, before tariffs on many goods from China were temporarily lowered to 30% from 145%.
Price increases happened fairly quickly, the New York Fed report said, according to Bloomberg. More than half of companies surveyed said they had increased prices within a month of experiencing higher import costs and many within a day or a week. A significant share of companies also reported they were purchasing more goods within the United States.
Fed policymakers are closely following how firms respond to tariffs. Many officials have said they expect higher inflation and unemployment.
According to Bloomberg, New York Fed researchers conducting the study said there were “some signs that the sharp and rapid increase in tariffs affected employment levels and capital investments.” Companies were “slightly tilted” toward a small reduction of workers, while nearly a quarter of services firms reduced their investments. Almost half of businesses reported a decrease in their bottom lines, the report said.
