Tariffs Could Increase Prices by 1.6%, According to Fed Survey

The prices of retail goods could see a jump in the coming months as the effects of tariffs begin to materialize. According to economists at the Atlanta Fed, retail prices could jump by 1.6% if businesses decide to pass on 100% of the costs of tariffs to customers. A 50% passthrough rate would result in retail prices increasing by 0.8%. The actual increase will ultimately depend on where tariff rates settle amid ongoing tariff talks with several key trading partners.

Firms Expected to Pass on Half of Tariff Cost Increase to Customers

The Atlanta Fed also conducted a survey asking businesses the percentage of cost increases that they would pass on to consumers given increases of 10% and 25%. On average, firms expect to be able to pass on 51.1% of a 10% jump in cost and 47.3% of a 25% jump in cost without affecting demand.

The study points to tariffs driving upward pressure on retail goods, which could result in a jump in inflation, further pressuring the Fed to keep rates unchanged or increase them. That could create pressure for the stock market, as higher rates result in a higher cost of borrowing for corporations.

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