By Michael S. Derby <\/p>\n
July 8 (Reuters) – Many Mid-Atlantic U.S. businesses aren’t done raising prices due to President Donald Trump’s slate of import tax increases, new research from the Federal Reserve Bank of \u200cNew York, released on Wednesday, said. <\/p>\n
“Our latest regional business surveys reveal that nearly half of firms \u200cthat have paid tariffs still plan additional price increases to offset these costs, with some expecting to raise prices six months or more \u200bin the future,” bank economists wrote on a blog on the bank’s website. This outlook means “inflationary pressures due to tariffs may well last for some time to come.” <\/p>\n
Based on surveys of businesses in the district, just under a third plan to raise prices over the next half year, while another set of firms plan longer-ranging increases. <\/p>\n
The New York Fed researchers \u200csaid an immediate lack of passthrough \u2060of higher costs likely owes to a few factors. For some, contracts have prevented sharing higher costs to date, and those adjustments can now take place when new contracts are \u2060set. <\/p>\n
Other firms “trickle up” price increases due to tariffs because “this pricing strategy allows firms to avoid shocking their customers,” the researchers wrote. <\/p>\n
The latest findings from the bank on tariffs and inflation are centered on firms that operate in New York, parts of \u200bConnecticut \u200band New Jersey, along with Puerto Rico and the U.S. \u200bVirgin Islands, and the report does not map \u200cthis experience to broader national trends. <\/p>\n
In a Tuesday television interview, John Williams, leader of the New York Fed, said that broadly speaking when it comes to the impact of tariffs driving up prices “we’re near the peak effect of that.” <\/p>\n
Earlier this year the New York Fed found itself in the crosshairs of the Trump White House after research said that most of tariff increases were being passed through to consumers and not eaten by foreign producers, as \u200cthe president has long contended. <\/p>\n
That finding unleashed a pointed attack on \u200bthe central bank even as the conclusion was no surprise to \u200bmost economists. Trump’s tariff regime since then has \u200bbeen complicated by the fact that the Supreme Court said key parts of it were \u200cdone illegally. <\/p>\n
High inflation has vexed Fed officials for \u200bsome time. Price pressures, distorted \u200bby COVID-19 factors, had been on a path back to the central bank’s 2% target until Trump returned to office and imposed the trade levies. <\/p>\n
Inflation has been further pressured higher by the Middle East \u200bwar, which returned to a hot \u200cphase on Tuesday. The fresh combat may mean that energy prices again begin to rise. Sustained high \u200binflation could give Fed hawks fresh reasons to argue for central bank rate hikes later \u200bthis year. <\/p>\n
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