Businesses across the country are raising prices as they absorb higher costs tied to tariffs, according to the Federal Reserve’s latest “beige book” report on the state of the U.S. economy.
The Fed’s July survey, which compiles economic data from all 12 regional districts, found that companies are increasingly passing those added expenses on to consumers. In cases where businesses held off on price hikes, profit margins took a hit instead—something the report attributed to growing consumer sensitivity to rising costs.
“Many firms passed on at least a portion of cost increases to consumers through price hikes or surcharges,” the Fed noted in the report released Wednesday.
Inflation, already on the rise, saw another jump in June. The Consumer Price Index (CPI) increased 2.7 percent year-over-year, up from 2.4 percent in May and 2.3 percent in April. Economists had predicted this kind of inflationary uptick, expecting it to show once businesses worked through pre-tariff inventories.
According to Fitch Ratings, the current U.S. tariff rate now sits at 14.1 percent—its highest level in decades. These tariffs include a general 10 percent rate implemented under President Trump, along with additional tariffs targeting China and specific product categories. Trump’s “reciprocal” tariffs, aimed at specific countries, have been temporarily paused until August 1 as trade negotiations continue.
Despite the broader increase in costs, some import prices have cooled. Fuel import prices dropped 0.7 percent in June after a sharp 5 percent decline in May, reflecting volatility in global energy markets amid Middle East tensions. Overall import prices ticked up by 0.1 percent in June but are still down 0.2 percent compared to a year earlier.
Core import prices, which exclude food and fuel, climbed 0.2 percent last month, building on a 0.1 percent increase in May.
Another contributing factor to inflation is the weakening U.S. dollar, which has fallen roughly 9 percent since the start of the year. Analysts say the dollar’s depreciation, tied in part to ongoing trade tensions, may amplify the inflationary effect of tariffs.
Michael Pearce, deputy chief U.S. economist at Oxford Economics, explained that a weaker dollar makes imported goods more expensive and increases the likelihood that businesses will pass tariff costs directly onto consumers. “Since the Trump administration began imposing tariffs, the dollar has depreciated, which could lead to a larger pass-through from tariffs to consumer prices,” he told Reuters.
The combination of higher input costs, rising inflation, and a softer dollar signals that price pressures may continue building—posing both a challenge for consumers and a political test for the administration as it presses ahead with its trade agenda.
