Federal Reserve's Report: U.S. Businesses Shifting Costs to Consumers Under the New Tariff Policy

The Beige Book, released by the Federal Reserve Board on April 23, 2025, indicates that U.S. businesses are experiencing cost pressures due to a new round of tariff measures and have started passing these costs onto consumers. Manufacturers and retailers are responding by increasing prices and imposing additional fees. While the ability to pass on costs varies depending on company size and industry, the overall trend shows that tariff policies are impacting consumer price structures.

Cost Pressure from Tariff Policies

In April 2025, the new round of the "Tariff Revival Plan" promoted by President Trump officially took effect, imposing tariffs as high as 145% on Chinese imports and a universal 10% tariff on most imports. Additionally, a 25% surcharge was levied on specific items such as automobiles, steel, and aluminum. These policies quickly altered the cost structure of businesses and triggered a chain reaction up and down the supply chain.

According to a Federal Reserve report, "Most regions indicated that businesses expect significant increases in import costs due to tariffs, and many have already received price increase notices from suppliers." In this context, companies are beginning to seek ways to pass on costs to consumers to maintain profit margins.

Price Adjustment and Passing Strategies

Data from S&P Global shows that in April 2025, the rate of increase in the selling prices of goods and services reached a 13-month high, with manufacturing prices rising particularly sharply. This wave of price increases was mainly driven by import tariffs, rising raw material prices, and labor costs.

A survey by the Federal Reserve Bank of Atlanta indicated that medium and large enterprises are more capable than small businesses of passing on increased costs to consumers. The report noted, "Small businesses report lower ability to pass on costs, while medium and large enterprises show a wider range of passing on costs." Additionally, the degree of cost passing for goods was slightly higher than for services.

In practice, companies have adopted various strategies. For example, some manufacturers have shortened their quotation periods to 30 days to quickly adjust prices, while retailers have added "tariff surcharges" to cope with rising costs. Retailers and manufacturers in the Boston area stated that although final prices are not yet fully determined, "tariff-related cost increases may significantly be passed on to product prices."

Corporate Responses and Industry Examples

Several companies have publicly stated they will adjust prices to cope with tariff pressures. In its first-quarter 2025 financial report, 3M Company noted that tariffs are expected to negatively impact earnings per share by $0.20 to $0.40 per share, equivalent to a cost impact of $200 to $300 million. The company's CFO, Anurag Maheshwari, stated that "selective price adjustments" will be used to partially offset these costs.

Verizon CEO Hans Vestberg admitted in a financial report conference call, "We will not absorb the significant increase in phone tariffs, which will ultimately be borne by consumers in the market."

In the manufacturing sector, Craig Souser, president of JLS Automation in Pennsylvania, pointed out that steel tariffs have led to increased costs, "which will ultimately be passed on to customers." The Wasserstrom Company in Ohio also stated that it will have to raise prices to cope with the new tariffs.

Uncertainty and Investment Delays

In addition to price adjustments, the Federal Reserve report also emphasized that the uncertainty of tariff policies is affecting corporate investment and planning. In April's Beige Book, the term "uncertainty" appeared 89 times, far higher than the 47 times in March. Business leaders generally reported difficulty in making long-term decisions in the absence of clear policies.

For example, a military equipment manufacturer in the Richmond area stated that the current situation is "too chaotic to make any future investment decisions." In the New York area, service providers reported a significant decline in future activity expectations and have begun to scale back investment plans.

Consumer Prices and Inflation Pressure

According to S&P Global data, the corporate price index rose to 55.2 in April, the highest level since 2023, indicating widespread price increases by companies. Federal Reserve Chairman Powell also recently stated publicly that tariffs are "very likely to cause a temporary rise in inflation" and warned that this pressure may persist.

Although the March Consumer Price Index (CPI) showed a slight decline, this data has not yet reflected the new tariffs implemented in April. Market observers generally expect that inflation data in the coming months will show a more pronounced upward trend.

Challenges for Small and Medium Enterprises

While large enterprises have stronger cost-passing capabilities, small and medium enterprises face greater pressure. Chuck Dardas, president of Michigan auto parts manufacturer AlphaUSA, stated, "Absorbing a 25% or 50% tariff is unsustainable in the long run, which could lead to companies of our size being unable to survive."

Lisa Winton, CEO of Winton Machine Company in Georgia, pointed out that the biggest challenge is policy uncertainty, "We cannot respond to such changes within two weeks, making it difficult for businesses to plan."

References

• Uncertainty About Tariffs Has Become 'Pervasive' In The Economy, Fed Finds
• Atlanta Fed: Small Firms Less Likely to Pass Through Cost Increases | PYMNTS.com
• Tariff-induced price hikes, trade worries highlighted in Fed's Beige Book
• Business already are trying to pass tariff cost onto customers, Fed report says
• Manufacturers Share Immediate Impacts Under Latest Tariffs
• Americans are expecting a tariff-fueled price surge. Corporate America says they're right: Morning Brief
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• Businesses are already trying to pass tariff costs onto customers, Fed report says