Businesses are passing along tariff costs, Fed reports
Higher costs from tariffs were reported by businesses in all of the Fed's 12 regional districts, and many made the choice to raise prices as a result.
'Many firms passed on at least a portion of cost increases to consumers through price hikes or surcharges,' the Fed's July beige book, released Wednesday, reported.
Those businesses that didn't push the additional costs through to their customers saw restricted profit margins, the beige book said, noting consumers' 'growing price sensitivity.'
Inflation in the Labor Department's consumer price index (CPI) jumped in June, partly as a result of the tariffs.
The CPI ticked up to a 2.7-percent annual increase last month from 2.4 percent in May and 2.3 percent in April.
The move was in line with expectations. Many economists have been predicting that inflation coming from tariffs would show up in prices over the summer after the clearing of inventories of wholesale goods purchases made prior to the tariffs.
Fitch Ratings recently put the aggregate U.S. tariff rate at 14.1 percent, the highest in decades.
While President Trump has instituted a 10-percent general tariff along with China-specific tariffs, and targeted tariffs on some individual goods, his country-specific 'reciprocal' tariffs have been paused until Aug. 1 as trade negotiations continue.
Import prices advanced by 0.1 percent in June and deflated by 0.2 percent relative to last year, the Labor Department reported Thursday.
The number was below economists' expectations and reflected lower energy prices.
Fuel import prices slid by 0.7 percent last month after dropping 5 percent during the previous month amid rising tensions and conflict in the Middle East. West Texas Intermediate crude oil is down more than 10 percent on the month.
Taking out fuel and food imports, core import prices increased by 0.2 percent in June after rising 0.1 percent in May.
The U.S. dollar is also losing value now relative to other currencies, having fallen about 9 percent since the beginning of the year amid President Trump's trade war.
Economists say the weaker dollar could boost inflation.
'Since the Trump administration began imposing tariffs, the dollar has depreciated, which could lead to a larger pass-through from tariffs to consumer prices,' Michael Pearce, deputy chief U.S. economist at Oxford Economics, told the Reuters news agency. 'A weaker dollar boosts the likelihood that firms pass on a larger share of tariffs.'
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Hamilton Spectator
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The rush slowed down after the president paused the new duties for 90 days and hasn't picked up again, Zhong said, even with Trump saying on July 7 that a 25% tax on imports from Japan and South Korea would go into effect on Aug. 1. Japan, the Philippines and Indonesia subsequently reached agreements with the Trump administration that lowered the tariff rates their exported goods faced — in Japan's case, from 25% to 15% — still higher than the current baseline of 10% tariff. But South Korea has yet to clinch an agreement, despite having a free trade agreement since 2012 that allowed cosmetics and most other consumer goods to enter the U.S. tax-free. Since the first store owned by Senti Senti opened 16 years ago, beauty products from Japan and South Korea became more of a focus and now account for 90% the stock. The business hasn't had to pass on any tariff-related costs to customers yet, but that won't be possible if the products are subject to a 25% import tax, Zhong said. 'I'm not really sure where the direction of K-beauty will go to with the tariffs in place, because one of the things with K-beauty or Asian beauty is that it's supposed to be accessible pricing,' she said. Devoted fans of Asian cosmetics will often buy direct from Asia and wait weeks for their packages to arrive because the products typically cost less than they do in American stores. Rather than stocking up on their favorite sunscreens, lip tints and toners, some shoppers are taking a pause due to the tariff uncertainty. Los Angeles resident Jen Chae, a content creator with over 1.2 million YouTube subscribers, has explored Korean and Japanese beauty products and became personally intrigued by Chinese beauty brands over the last year. When the tariffs were first announced, Chae temporarily paused ordering from sites such as , a shopping platform owned by an e-commerce company based in Hong Kong. She did not know if she would have to pay customs duties on the products she bought or the ones brands sent to her as a creator. 'I wasn't sure if those would automatically charge the entire package with a blanket tariff cost, or if it was just on certain items,' Chae said. On its website, YesStyle says it will give customers store credit to reimburse them for import charges. At Ohlolly, an online store focused on Korean products, owners Sue Greene and Herra Namhie are taking a similar pause. They purchase direct from South Korea and from licensed wholesalers in the U.S., and store their inventory in a warehouse in Ontario, California. After years of no duties, a 25% import tax would create a 'huge increase in costs to us,' Namhie said. She and Greene made two recent orders to replenish their stock when the tariffs were at 10%. But they have put further restocks on hold 'because I don't think we can handle 25%,' Namhie said. 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'I'd still indulge in my favorites, but am always looking for great products in general,' she said. Bhasin, in Menlo Park, California, plans to keep buying her face masks too, even if the price goes up, because she likes the quality of Korean masks. 'If prices will go up, I will not shift to U.S. products,' she said. 'For face masks, I feel there are not a ton of solid and reliable substitutes in the U.S.' ___ AP audience engagement editor Karena Phan in Los Angeles contributed to this report.
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