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 portions attributable to 2025 trade policies. Using perceived tariff exposure as an instrument, we identify the causal effects of realized and expected costs on prices. Reset prices incorporate almost 70 percent of current costs and nearly 45 percent of expected costs over the next year. The importance of these channels varies significantly across firms. Frequent price adjusters respond mainly to current costs, while sticky-price firms weight expectations more heavily. Goods producers adjust contemporaneously, whereas service firms are more forward looking, as are firms with a high labor share or facing high trade uncertainty. This evidence favors endogenous pricing frameworks in which uncertainty reshapes the reset-price kernel across horizons or imperfect-information models in which uncertainty amplifies the role of expectations over standard time-dependent models.