Tariff Costs: Businesses Absorb Impact | Analysis
- Business executives are finding it more difficult to pass the full cost of tariffs onto consumers, a shift from 2018 when they largely succeeded, according to Federal Reserve...
- In April,businesses estimated they could only pass through about half of increased tariff costs without impacting demand,the Atlanta Fed researchers noted in a blog post.
- The survey revealed varied opinions, but on average, firms believe they can pass through 51.1% of a 10% cost increase and 47.3% of a 25% cost increase without...
Businesses are struggling too pass tariff costs to consumers, a critically important shift from 2018, impacting pricing strategies and profitability. Current data reveals firms can onyl pass through about half of increased expenses, unlike the past. This change comes as customers show greater sensitivity to price increases, affecting the bottom lines of companies. The ability to pass on costs is also significantly influenced by sales growth,with healthy sales allowing higher pass-through rates. According to News Directory 3S analysis, companies with lower sales are more hesitant to raise prices fully. Discover what’s next for navigating these complex economic challenges.
Businesses Struggle to Pass Tariff Costs to Consumers
Updated June 06, 2025
Business executives are finding it more difficult to pass the full cost of tariffs onto consumers, a shift from 2018 when they largely succeeded, according to Federal Reserve Bank of Atlanta researchers.This change reflects a concern that customers are now more sensitive to price increases.
In April,businesses estimated they could only pass through about half of increased tariff costs without impacting demand,the Atlanta Fed researchers noted in a blog post. This contrasts sharply with 2018, when nearly all tariff costs were passed on.
The survey revealed varied opinions, but on average, firms believe they can pass through 51.1% of a 10% cost increase and 47.3% of a 25% cost increase without reducing demand for their products or services. The ability to pass on tariff costs is influenced by a company’s current sales revenue growth.
Companies with less-than-normal sales levels reported they could pass through 45.6% of a cost increase, while those with above-normal sales could pass through nearly two-thirds. This suggests that weaker perceived demand makes firms hesitant to fully pass through tariff-related cost increases.
A separate report from the Federal Reserve Bank of New York indicated that many companies have already passed higher input costs to consumers. The PYMNTS Intelligence report, “Tariffs and Business Uncertainty: The Current State of Play,” found that a significant percentage of goods and services firms plan to increase prices due to tariffs.
What’s next
As businesses navigate the complexities of tariffs and pricing strategies, understanding consumer price sensitivity and adapting to changing market conditions will be crucial for maintaining profitability and competitiveness.