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Firm’s Expected Unit Costs and Price Growth for 2026, data from Atlanta Fed

Please consider the Atlanta Fed report Firms’ Cost and Price Expectations in the Wake of Tariff Hikes

A striking feature of this year’s tariffs has been their (apparently) subdued impact on US retail price growth to date. Indeed, core goods prices (which exclude food and energy) have risen at an annualized rate of roughly 2 percent since the tariff announcements in early April.

From our perspective, an important place to look for answers to that debate ultimately rests with businesses—the price-setters in the economy. To that end, in this blog post we investigate cost and price expectations from the Atlanta Fed’s Business Inflation Expectations (BIE) survey and The CFO Survey (a quarterly survey of CFOs that the Atlanta Fed conducts in partnership with the Richmond Fed and Duke University). 

Around two-thirds of respondents to these surveys imported at least some portion of their inputs/supplies from abroad, while the rest source all their inputs domestically. We compare these two groups to see if importing firms—which are more exposed to tariffs—expect meaningfully different outcomes for their business.

Unit Cost Expectations by Input/Supply Source

Like unit cost expectations, average price growth expectations across both surveys remain elevated relative to last year. Most worrisome is that expectations among nonimporting firms have risen sharply.

The fact that firms not exposed to tariffs expect to accelerate price increases suggests some risk that inflationary pressures are broadening beyond those firms and industries directly affected by tariffs (a finding consistent with other recent Atlanta Fed research).

The standard thinking regarding tariffs is that they represent a one-time shift in the overall price level, but as Chair Powell noted in a speech  last month, “A ‘one-time’ increase does not mean ‘all at once.’ Tariff increases will likely take some time to work their way through supply chains.”

Indeed, the lack of immediate passthrough might be related to gaps between the announcement and imposition of new tariffs, uncertainty over the where tariff rates will ultimately land, or the choice by importing firms to respond to tariff-related cost increases by squeezing their own profit margins rather than increasing prices to customers.

Responses to our business surveys suggest a delayed—but nevertheless meaningful—impact from tariffs. Firms’ unit cost and price growth expectations have risen markedly since this time last year, with prices expected to remain elevated into 2026. At the same time, even nonimporting firms that are not directly exposed to increased tariff rates expect an acceleration in price growth, suggesting some broadening of price pressures.

Key Cost Notes vs Prior Survey

• 0% of Firm’s Inputs Imported: 3.8% up from 3.4%
• ≥ 10% of Firm’s Inputs Imported: 4.7% up from 4.6%
• ≥ 20% of Firm’s Inputs Imported: 4.9% down from 5.3%
• ≥ 30% of Firm’s Inputs Imported: 5.7% up from 4.0%

Key Price Notes vs Prior Survey

• 0% of Firm’s Inputs Imported: 4.2% up from 3.8%
• ≥ 10% of Firm’s Inputs Imported: 4.3% up from 4.0%
• ≥ 20% of Firm’s Inputs Imported: 4.7% up from 4.3%
• ≥ 30% of Firm’s Inputs Imported: 5.1% up from 4.1%

Passthrough Expectations Percent (Expected Price/Expected Cost)

• 0% of Firm’s Inputs Imported: 110.5% of expected costs
• ≥ 10% of Firm’s Inputs Imported: 91.5% passthrough
• ≥ 20% of Firm’s Inputs Imported: 95.9% passthrough
• ≥ 30% of Firm’s Inputs Imported: 89.5% passthrough

These are not benign inflation numbers. Of course, costs may rise more or less than expected. And weakening demand may interfere with corporate price hike plans.

But in the absence of weakening demand (or Trump reducing tariffs), expect more inflation.

Worse yet is the continued possibility of stagflation. The bond market remains uncommitted, but gold acts like stagflation is the expected result.

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