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Will Tariffs Touch Off an Inflationary Impulse? Business Execs Think So

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Abstract

Following the inflationary surge from 2021 to 2023, which was touched off by supply chain constraints and shipping bottlenecks, we evaluate a new panel of own-firm price and unit cost growth expectations in the Atlanta Fed's Survey of Business Uncertainty for signs that the anticipated impact from tariffs is broadening beyond directly affected firms. We find evidence for the potential of tariffs to touch off another bout of high inflation. First, firms that are directly exposed to tariffs have increased their year-ahead price growth expectations sharply (by 0.7 percentage points). Second, firms that are not directly exposed to tariffs but are operating in industries that are highly exposed to tariffs anticipate a moderately higher trajectory for year-ahead price growth (0.3 percentage points). Third, this broadening of overall price pressures—a key feature of the pandemic-era inflationary impulse—is only partially offset by lower price increases from tariff-exposed firms that are operating largely in industries not exposed to tariffs.

Suggested Citation

  • Aaron Jalca & Brent Meyer & Michael Sparks & David Wiczer, 2025. "Will Tariffs Touch Off an Inflationary Impulse? Business Execs Think So," Policy Hub, Federal Reserve Bank of Atlanta, vol. 2025(4), pages 1-20, August.
    • Handle: RePEc:fip:a00068:101532
    DOI: 10.29338/ph2025-04
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    1. Redding, Stephen & Amiti, Mary & Weinstein, David, 2019. "The impact of the 2018 trade war on U.S. prices and welfare," LSE Research Online Documents on Economics 102619, London School of Economics and Political Science, LSE Library.
    2. Mary Amiti & Stephen J. Redding & David E. Weinstein, 2019. "The Impact of the 2018 Tariffs on Prices and Welfare," Journal of Economic Perspectives, American Economic Association, vol. 33(4), pages 187-210, Fall.
    3. Altig, David & Barrero, Jose Maria & Bloom, Nicholas & Davis, Steven J. & Meyer, Brent & Parker, Nicholas, 2022. "Surveying business uncertainty," Journal of Econometrics, Elsevier, vol. 231(1), pages 282-303.
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    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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