Businesses are pushing higher costs from tariffs on to consumers in the form of higher prices, according to the Federal Reserve’s latest anecdotal survey.
The Fed’s latest “beige book” found that businesses across the country reported passing the cost of tariffs onto U.S. consumers, something President Donald Trump warned them not to do. All 12 Fed districts reported price increases. Seven characterized price growth as “moderate,” and five called it “modest.”
“Many firms passed on at least a portion of cost increases to consumers through price hikes or surcharges, although some held off raising prices because of customers’ growing price sensitivity, resulting in compressed profit margins,” according to the Fed report.
Those higher prices could become more visible later this year.
“Contacts in a wide range of industries expected cost pressures to remain elevated in the coming months, increasing the likelihood that consumer prices will start to rise more rapidly by late summer,” according to the latest beige book report.
Trump has told businesses that he doesn’t want them to raise prices. He wants businesses to absorb the loss without passing on the higher prices to consumers.
Shortly after Walmart said it would have to raise prices throughout its stores in May, Trump told the world’s largest retailer to “eat it.”
“Walmart should STOP trying to blame Tariffs as the reason for raising prices throughout the chain. Walmart made BILLIONS OF DOLLARS last year, far more than expected,” Trump said at the time. “Between Walmart and China they should, as is said, ‘EAT THE TARIFFS,’ and not charge valued customers ANYTHING. I’ll be watching, and so will your customers!!!”
The White House has repeatedly denied that tariffs will raise consumer prices or that American companies will bear the higher costs.
Earlier this week, another Fed report found consumer prices increased more than expected in June as Americans see higher prices on a wide range of imported goods.
The Consumer Price Index for All Urban Consumers, or CPI-U, showed a 0.3% increase last month – triple May’s 0.1% pace and the most significant monthly gain since January, when Trump returned to the White House for his second term.
On an annual basis, inflation was at 2.7%, up from 2.4% in May. That’s above the 2.6% yearly gain economists had projected for June. Core CPI, which excludes fast-moving food and energy prices, rose 0.2% over the month and 2.9% over the past year. That was in line with forecasts.
Trump has been sharply critical of Federal Reserve Chairman Jerome Powell and the Federal Reserve. He wants the Fed to lower interest rates. The Fed has taken a wait-and-see approach as Trump continues to roll out tariffs.
In June, an appeals court ruled that Trump’s “Liberation Day” tariffs could remain in place while a legal challenge over his authority to impose import taxes continued.
That came after the administration appealed when a three-judge panel of the U.S. Court of International Trade unanimously ruled in May that Congress did not give the president tariff authority under the International Emergency Economic Powers Act of 1977. The appeals court ruling means Trump can continue collecting the taxes while the legal challenge moves ahead.
Economists, businesses and some publicly traded companies have warned that tariffs could raise prices on a wide range of consumer products.
Trump has said he wants to use tariffs to restore manufacturing jobs lost to lower-wage countries in decades past, shift the tax burden away from U.S. families, and pay down the national debt.
A tariff is a tax on imported goods paid by the person or company that imports the goods. The importer can absorb the cost of the tariffs or try to pass the cost on to consumers through higher prices.
