Federal Reserve Reports Businesses Passing Tariff Costs to Consumers

News Summary

The Federal Reserve Bank of New York’s recent survey indicates that a majority of businesses in New York and northern New Jersey are passing increased tariff costs onto consumers, leading to higher prices for goods and services. Almost 90% of manufacturers and about 75% of service firms reported increased costs due to tariffs, with more than half of those businesses raising prices shortly after the tariff adjustments. The survey sheds light on the economic impact of tariffs and the uncertainty surrounding future tariff changes.

New York – The Federal Reserve Bank of New York has revealed that a significant number of businesses in New York and northern New Jersey are passing increased tariff costs onto consumers, leading to higher prices for goods and services. This information stems from a recent survey conducted between May 2-9, 2025, which sheds light on the economic impact of tariffs on local businesses.

According to the survey, nearly 90% of manufacturers and approximately three-quarters of service firms import goods, with an average of 30% of inputs coming from outside the U.S. Manufacturers reported experiencing an average tariff rate of around 35%, representing a substantial 25 percentage point increase in just six months. Similarly, service firms indicated an average tariff rate of 26%, marking a 17-point rise during the same timeframe.

Furthermore, about 75% of businesses facing tariff-related cost increases in both the manufacturing and service sectors have passed on at least a portion of these increased costs to their customers. Nearly one-third of manufacturers and 45% of service firms reported fully passing on these costs, while 45% of manufacturers and one-third of service firms indicated they only passed along part of the increased expenses. More than half of the firms that chose to raise prices did so within a month of incurring tariff-related cost increases, while a quarter of businesses planning to increase prices aimed to do so within one to three months of the tariff adjustments.

These findings come shortly before a significant reduction in tariffs on China, which was set to drop from 145% to 30% under President Trump’s policy changes. Despite this reduction, many businesses reported a considerable degree of uncertainty regarding future tariffs, with numerous firms anticipating further increases. Specifically, half of the service firms surveyed expected tariffs to rise in the coming months, while about one-third predicted a decrease.

The imposition of tariffs has been disruptive to supply chains, prompting many firms to consider relocating their operations or sourcing inputs from alternative locations to mitigate the impact. Analysts from BD8 Capital Partners have discussed the broader implications of President Trump’s tariff threats, particularly concerning major companies such as Apple and the effects on international trade within the European Union.

In summary, the New York Fed’s survey highlights how businesses are adapting to rising tariffs by adjusting their pricing strategies, ultimately impacting consumers. As operational decisions shift in response to tariffs, the long-term effects on supply chains and pricing remain uncertain, adding to the economic pressures faced by both businesses and consumers.

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