34% of firms pass tariffs downstream

Tariffs are now showing up where people actually feel them — in prices, margins, and hiring plans. The new signal here is not just that firms dislike tariffs. It’s that more of them are openly saying they are pushing the cost through to customers, and more still expect another round of price increases soon. That makes the tariff debate less theoretical. It starts to look like a slow tax on buying things in the U.S. ### What changed in this latest snapshot? KPMG’s Q2 2026 tariff survey says 34% of U.S. business leaders are now passing on more than half of their tariff costs to customers. Another 55% say they expect to raise prices by up to 15% within the next six months. That is a sharp step up from KPMG’s earlier reads — 13% were passing through most costs in May 2025, then 22% in September 2025. (kpmg.com) ### Why does that matter more than the headline number? Because pass-through is the whole game. A tariff only stays a “foreign producer problem” if exporters cut prices enough to absorb it or if U.S. firms eat the hit in their margins. But when a third of firms are already pushing most of the cost downstream — and more than half are preparing fresh increases — the burden is moving toward households. KPMG’s own framing is basically that the consumer is now carrying more of the load. (kpmg.com) ### Are firms only raising prices? No — and that’s the catch. Price hikes are just the visible response. KPMG’s survey also says 82% of companies report declining foreign sales, which tells you tariffs are squeezing demand and competitiveness at the same time. Other business surveys show companies also tweak contracts, service levels, sourcing, and product mix before or alongside outright sticker-price increases. That means the cost can show up as worse terms or thinner products, not just a higher number on the shelf. (manufacturingdive.com) ### What does the research say happens to jobs? The cleanest recent evidence cuts against the simple “tariffs save factories” story. AEA’s summary of new work on the 2002 Bush steel tariffs says places exposed to higher steel costs saw persistent losses in steel-intensive manufacturing, while protected steel-producing areas did not get meaningful employment gains. Overall local employment stayed roughly stable, but displaced workers did not smoothly move into other manufacturing jobs. In plain English — the jobs pain moved around more than it disappeared. (aeaweb.org) ### Didn’t tariffs help some manufacturing sectors? Sometimes, but unevenly and often slowly. A 2025 NBER model says tariffs can raise manufacturing employment in the long run, yet they are likely to reduce it in the short run because supply chains and workers do not rewire overnight. Another 2025 NBER paper on the newer trade war finds manufacturing jobs can rise while service and agricultural jobs fall, leaving total employment lower and real income down about 1% by 2028 under its assumptions. So yes, some factory lines may benefit — but the economy-wide tradeoff is real. (nber.org) ### How does the older “China shock” fit in? It matters because it shows how sticky local labor damage can be. The classic NBER work on the China shock found wages and labor-force participation stayed depressed for years in more exposed regions, with offsetting gains elsewhere arriving slowly if at all. That is why “we’ll protect one upstream sector and the rest will sort itself out” is a risky bet. Labor markets do not reset like a spreadsheet. (nber.org) ### So are tariffs inflationary or just disruptive? Both, basically. Historical work released in 2026 finds tariff shocks are contractionary — imports fall, exports decline with a lag, and output and manufacturing activity drop persistently. Earlier trade-war research also found the 2018–19 tariffs were large and broad enough to change bilateral prices in meaningful ways. Put that together with the new business survey, and the picture is pretty consistent: tariffs are not just a border policy. They are a domestic cost shock. (nber.org) ### Bottom line The new 34% figure matters because it shows tariff costs are no longer sitting quietly inside company spreadsheets. They are moving into consumer prices, while the promised job gains remain patchy and slow. That does not mean every tariff is pointless. But it does mean the easy version of the story — punish imports, revive industry, no big side effects — is getting harder to defend.