Fed Survey Shows Manufacturers Don’t Know How To Price Anything

By Mish Shedlock of MishTalk

Monday, September 1, 2025 10:35 PM EDT

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Over half of manufacturers have increased prices. Another 26 percent intend to. And 47 percent expect to raise them again.

Tariff Cost Pass-through

Please consider Tariff Cost Pass-through Among Fifth District Firms by the Richmond Fed.

With tariffs top of mind for many firms in the Fifth District, the Richmond Fed’s August business surveys sought to understand how firms have reacted to changing trade policy. As we saw in our March surveys and May surveys, firms continued to report heightened uncertainty around tariff policy. For some, this uncertainty has led to concerns about earnings and the effects on customers. One commercial laundry machine manufacturer stated, “We cannot predict cost for products, which means we have no idea as we sign contracts if we will be able to build the equipment and cover costs or make profits.” Meanwhile, a factory equipment manufacturer stated, “I am very concerned about the impact of tariffs on my customers.”

Cost Uncertainty Prevails Among Respondent Firms

Uncertainty resulting from frequent changes in trade and tariff policy can hamper businesses’ ability to plan long term. According to our August surveys, almost 30 percent of firms were not at all certain about their input costs for the remainder of the year. The uncertainty went beyond just those firms affected by tariffs: Sixteen percent of firms that reported not importing products subject to tariffs were not at all certain about their input costs for the remainder of the year.

Thirty percent of firms were only slightly certain about input costs. That means that well over half of firms are relatively uncertain about what they will be paying for inputs in 2025. This was especially prevalent among manufacturing firms, where 44 percent reported that they were not at all certain about input prices for the remainder of the year.

A vehicle parts manufacturing firm reported, “Over the past 20+ years, we have developed good relationships and a reliable, stable supply chain. The tariffs and the threat of tariffs have completely upended that … we will have to increase prices to our customers or make less margin or, most likely, both.”

Half of Firms Are Directly Affected by Tariffs

In our August surveys, 46 percent of respondents reported that all or some of their imported products are currently subject to tariffs, while 45 percent of firms noted that they either do not import products from outside the country or that their imports are not subject to tariffs.

Almost three-quarters of manufacturers reported direct tariff impacts, compared to only 36 percent of non-manufacturing firms.

Cost Uncertainty Prevails Among Respondent Firms

Uncertainty resulting from frequent changes in trade and tariff policy can hamper businesses’ ability to plan long term. According to our August surveys, almost 30 percent of firms were not at all certain about their input costs for the remainder of the year. The uncertainty went beyond just those firms affected by tariffs: Sixteen percent of firms that reported not importing products subject to tariffs were not at all certain about their input costs for the remainder of the year.

Service sector firms (66 percent) more likely to report certainty than manufacturers (52 percent). Nonetheless, there were service sector firms that reported ripple effects of trade policy changes. For example, one professional services respondent reported, “My firm supports businesses that import materials from other countries, so we are impacted by their ability to invest in professional services based on increased costs and supply issues related to tariffs.”

Most Impacted Firms Have Increased Prices, Many Plan to Again

Some firms remain in “wait and see” mode as uncertainty around tariff policy and input prices persists. However, most impacted respondents have begun passing along tariff costs to their customers by raising prices. Of the roughly half of firms that reported direct tariff impacts, nearly 60 percent of them have already increased their prices due to tariffs, and most of these firms plan to raise prices again. In contrast, about 25 percent of firms reported that they have been impacted by tariffs and plan to raise prices but have not yet. For example, a South Carolina transportation manufacturer plans to pass on tariff costs but has not yet due to concerns about demand for their product. As they explained, “Tariff cost transfer to customers is creating the largest earnings uncertainty in our 2026 business plan.” Fourteen percent of respondents who reported being affected by tariffs were unsure about whether to adjust prices.

When Might Firms Implement Price Increases?

Many firms anticipate raising prices this year. Almost one-quarter of respondents that are impacted by tariffs have not increased prices but plan to. Roughly 50 percent of these firms expect to increase prices before the end of the year. Another 29 percent expect to start passing through in 2026, and 21 percent are not sure when they will start passing through costs.

Another 45 percent of tariff-affected respondents have already increased prices and expect to increase prices further. Nearly 70 percent of these firms expect to raise prices by October, and few anticipate waiting until 2026. In other words, firms that have increased prices already expect to increase prices again sooner than those firms that have yet to increase prices. Still, many firms continue to be unsure about the timing of their next price increases. A North Carolina transportation company reported that they have begun passing through tariff costs, but they are waiting until next year to increase prices further, noting that “We have found demand softening, which has led … to much more price competition. …“

Conclusion

Results from our August business surveys suggest that many firms in the Fifth District are still facing tariff-related cost increases as well as uncertainty around precise tariff impacts. These cost increases are prompting some firms to raise the prices they charge customers. However, not all affected firms have raised prices yet. A previous post illustrated the factors that complicate firms’ tariff-related pricing decisions, and our surveys indicate that many affected firms will institute price increases through the remainder of this year and into next year.

Who Pays the Tariff?

Trump says the exporters.

Wealth Professional reports Americans may face bulk of tariff costs Goldman Sachs says but Trump says no