Inflation could be a third lower without tariffs, financial decision makers say

By Matt Egan, CNN

New York (CNN) — Tariffs are fueling a significant chunk of price hikes across the economy, according to a survey of executives released Wednesday.

Chief financial officers estimate tariffs are to blame for about one-third of their companies’ price growth this year, according to The CFO Survey issued by Duke University and the Federal Reserve Banks of Richmond and Atlanta.

So, inflation could have been about a third lower this year without President Donald Trump’s historically high tariffs.

That’s nothing to sneeze at. If the latest inflation reading of 2.9% were a third lower, it would be essentially right at 2% – the level the Federal Reserve targets for price increases that are neither too hot or too cold.

The findings stand in stark contrast with Trump’s frequent claims that there is “no inflation” and that his aggressive trade strategy is not causing price hikes.

‘Long-drawn-out affair’

The survey also undermines the argument that tariffs will simply be a one-time price adjustment.

CFOs estimate tariffs will account for about a quarter of price increases next year, too.

“This isn’t a one-time thing. It is still going to be happening in 2026. This is going to be a long-drawn-out affair,” John Graham, a finance professor at Duke’s Fuqua School of Business and the director of The CFO Survey, told CNN in a phone interview.

Graham added that tariff-driven price hikes will likely linger into 2027 as well, although that wasn’t asked in the survey.

Nearly a quarter of the businesses surveyed reported they will cut spending this year due to tariffs.

In a statement to CNN, White House spokesman Kush Desai argued the Trump administration’s agenda of tax cuts, energy abundance and deregulation are “slashing costs and boosting incomes” for families and businesses.

“President Trump’s tariffs are boosting demand for American workers and American products – from spurring trillions in investment commitments to hire and make in America to securing historic trade deals that create unprecedented foreign market access for American exports,” Desai said.

Price hikes on toys, tools and shoes

Tariffs are making it more expensive for businesses to import goods, components and raw materials. On average, CFOs estimate their costs will increase by 4.4% this year — about 1.7 percentage points of that increase is driven by tariffs.

The survey suggests they plan to pass along a significant chunk of those higher costs to customers.

A slew of major companies have announced plans to increase prices on some items due to tariffs, including Walmart, Target, Hasbro, Nike, Mattel, Stanley Black & Decker and Procter & Gamble. The CFO survey found that price increases this year are expected to reach 3.9%, with tariffs accounting for 1.3 percentage points of that jump.

During a press conference last week, Fed Chair Jerome Powell noted that while the “pass-through” of tariffs into prices has been “slower and smaller than we thought,” it’s likely not over yet. Powell said the Fed anticipates inflation will continue to rise, though “maybe not as high” as expected.

Powell noted that goods prices generally fell over the past 25 years, outside of the Covid-19 pandemic. But that trend has reversed this year after Trump took office, likely because of tariffs.

‘Unreasonable levels of concern’

Some goods and services exposed to tariffs, such as jewelry and car repairs, have rapidly gone up in price.

For instance, most coffee consumed in the United States is imported from Brazil, a country now facing 50% tariffs from the Trump administration. Coffee prices spiked by 4% between July and August, the biggest monthly increase in 14 years, according to the Bureau of Labor Statistics. Coffee was nearly 21% more expensive compared to the same month last year – the largest annual jump since 1997.

Tomato prices also climbed by 4% in August, the most since the pandemic. Most tomatoes imported from Mexico face 17% tariffs from the Trump administration that kicked in over the summer.

Powell’s newest colleague, Fed Governor and White House economist Stephen Miran, has argued worries about price hikes caused by trade policy are overblown.

“With respect to tariffs, relatively small changes in some goods prices have led to what I view as unreasonable levels of concern,” Miran, a staunch Trump ally, said in a speech on Monday at the Economic Club of New York.

Who is paying for tariffs?

Miran, who joined the Fed last week, said he expects “exporting nations will have to lower their selling prices” to absorb the cost of tariffs.

If that were happening on a consistent basis, US import prices should be falling. But they’re not. Import prices unexpectedly increased by 0.3% in August, according to the BLS. Prices for nonfuel imports jumped by the most since April 2024.

“The tariffs are not, mostly not, being paid by exporters,” Powell said at last week’s press conference.

‘All over the place’

The good news is the outlook for the US economy among CFOs has improved since the April-to-June period as uncertainty has eased a bit.

Moreover, there was a modest dip in expectations for cost and price increases this year. The CFO Survey said this decline may indicate that some businesses have yet to see the “extreme impacts” from tariffs they were bracing for.

Another explanation, according to the researchers, is that some businesses now expect these cost and price hikes to take place in 2026 instead of this year.

The bad news is that for the third consecutive quarter, tariffs and trade policy remain the No. 1 worry for CFOs. According to the survey, CFOs who cited tariffs as a top concern were “notably more downbeat” about the economy and their own firm.

One unnamed CFO in the Duke survey said their business is spending “a lot of time identifying, tracking and charging customers” for tariffs. This time equals to about two to three full-time employees working on tariffs, prompting the firm to cover its higher expenses by charging customers more.

“We buy products from Canada, Mexico, and of course, China,” another unnamed CFO in the survey said. “Our main issue is that we can only set prices once a year, but our product costs are all over the place.”

The-CNN-Wire
™ & © 2025 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.