Consumers may soon face added cost pressure, not so much from a surprise source as a delayed one..During her keynote at the Bank Holding Company Association’s Fall Seminar, Lindsey Piegza, PhD, described how, in the first year of tariffs, U.S. businesses provided a considerable buffer for consumers – “not out of benevolence by any means, but out of risk of losing market share.”Piegza said that businesses stockpiled inventories in advance of the tariffs and were willing to strategically trim their margins. But that restraint might be reaching its limits. “At this point, inventories have been drawn down, and margins have been compressed. So businesses are facing increased pressure to pass on additional price increases,” she said, noting that about 50 percent of businesses are poised to raise prices in the coming six months.That’s a steady increase from the onset of tariffs, when “the passthrough rate was only about 17 percent. It rose to only about 35 percent going into this year,” Piegza said.“We estimate that if tariffs were entirely passed through, they would raise inflation by one-and-a-half percent. But the reality, even going back to the start of 2025, has been much more muted,” she said.With September’s 3.7 percent inflation reading higher than expected and the Fed signaling a longer road to its 2-percent inflation target, a higher pass-through rate on tariffs could further strain consumers. “We’re seeing higher prices, particularly higher energy prices, seep out into the different fingerlings of the economy. Through transportation, as we talk about diesel costs up over six dollars. Into the food market, 80 percent of which now needs to be transported to restaurants and grocery stores at a higher cost,” Piegza said “Even with the realized impact of tariffs relatively muted, now you layer on the reality of higher energy prices, and this has dramatically impacted activity, confidence and inflation expectations.”
