A big question in President Trump’s trade war is who will bear the brunt of the tariffs. The president and his advisers have insisted that foreign governments face the costs, not American businesses or consumers.
Whether tariffs ultimately drive up prices could have significant implications for the Federal Reserve, which aims to keep inflation low while maximizing employment.
Research suggests that Americans will pay the price — but when, and to what extent? Many businesses have raced to stock up on imports in anticipation of higher tariffs, delaying passing on those costs to consumers until they have exhausted their current inventories. In the case that businesses choose to absorb the costs themselves, inflation could be more muted. But if more businesses begin to lift prices in response to the tariffs, forcing consumers to shoulder the burden, inflation could rise more rapidly.
There are emerging signs that companies may be running out of room to keep prices stable. Prices were notably up in June for some categories of items that are heavily exposed to tariffs, including toys and appliances, according to recent data from the Department of Labor.
Adidas’s chief executive warned on Wednesday that tariffs “will directly increase the cost of our products for the U.S.” Mohawk Industries, a large flooring company, told investors last week that it was pushing through price increases in response to the tariffs. Other public companies, such as Procter & Gamble, Stanley Black & Decker and Carter’s, a children’s apparel maker, also said on earnings calls in recent days that they planned to raise prices. And in public filings, many companies, including FedEx and Chipotle, cited tariff-related risks and cost pressures.
Some smaller, independent companies that were at first reluctant to raise prices because they feared spooking their customers are finding that they have dwindling options as tariffs erode their profit margins.
“Tariffs do lead to price increases — it’s that simple,” said Matt Pavich, the senior director of strategy and innovation at Revionics, a retail price-optimization company. “Cost increases lead to price increases.”
Sydney Ember is a Times business reporter, covering the U.S. economy and the labor market.
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