The Future in Today’s Prices: Evidence from a Survey of U.S. Firms

Do firms adjust prices to realized costs, expected costs, or both? We address this question using a new survey of U.S. businesses that separately measures realized cost changes since the last price adjustment and expected cost changes over the subsequent year, including the portion attributable to new trade policies introduced in 2025. We use individual perceived tariff exposure as an instrument to identify the causal effects of realized and expected costs on price changes. We find an incomplete pass-through, of about 68 percent, of current costs to reset prices. In addition, reset prices incorporate about 43 percent of expected costs over the next year. The importance of these channels varies across firms: Frequent price adjusters respond mainly to current costs, while sticky-price firms place more weight on expectations; goods producers adjust more contemporaneously, whereas services firms are more forward-looking, similar to firms with high trade uncertainty. While several pricing models can rationalize a role for expected costs, the evidence favors endogenous pricing frameworks in which uncertainty reshapes the reset-price kernel across horizons or imperfect-information models in which uncertainty can amplify the role of expectations.