American Businesses Raise Prices on Non-Tariffed Goods Amid Inflation Fears

The Federal Reserve Bank of New York released a report on Wednesday, indicating that American businesses have not only increased the prices of imported goods to offset tariff costs but have also raised the prices of goods that are not subject to tariffs. This dual pricing strategy raises concerns among economists about the potential for heightened inflation risks.

The survey, conducted between May 2 and May 9, included approximately 110 manufacturers and over 200 service companies from New York and New Jersey. During this period, the Trump administration had imposed tariffs of up to 145% on Chinese goods and an additional 25% on imported steel and aluminum. However, the situation changed after the survey period, with the U.S. and China issuing a joint statement on May 12 to reduce tariffs over 90 days, and Trump announcing on June 1 that steel and aluminum import tariffs would be increased to 50%.

A significant number of companies reported raising prices on goods not affected by tariffs as a strategy to mitigate the broader impact of tariffs. One heavy construction equipment supplier mentioned increasing prices on non-tariffed goods to create additional profit margins before tariff costs rose. The New York Fed's report noted that most businesses had at least partially passed on tariff costs through price increases, with one-third of manufacturers and 45% of service companies fully passing on these costs.

Economists attribute the price increases on non-tariffed goods to businesses feeling the pressure of economic uncertainty. Susan Ariel Aaronson, a professor at the Elliott School of International Affairs at George Washington University, highlighted the unpredictability of Trump's trade policies, stating that no one knows what policies he might implement next. She warned that when businesses feel compelled to raise prices on more products to cope with tariffs, it is detrimental to inflation.

Rebecca Homkes, a lecturer at London Business School and a faculty member at Duke University's Corporate Education, further noted that some companies might resort to measures such as layoffs, delisting certain products, or raising prices on items they initially did not intend to increase. She emphasized that while price increases harm consumers, businesses are left with no choice but to pass on costs after exhausting other options.