American businesses have begun to pass the costs of President Donald Trump's tariffs directly on to consumers, according to a stark new assessment from the US Federal Reserve. The findings directly contradict the administration's dismissal of the idea that the import duties would lead to higher prices.
Fed's Beige Book Highlights Widespread Cost Pressures
The central bank's latest "Beige Book", a survey of economic conditions published on Thursday 15 January 2026, found that the financial burden of tariffs is now being felt across the entire country. "Cost pressures due to tariffs were a consistent theme across all Districts," the Federal Reserve stated in its January report.
The report explains that many companies initially absorbed the extra costs themselves. However, as their stocks of goods purchased before the tariffs were introduced have been sold, they are now forced to increase prices. "Several contacts that initially absorbed tariff-related costs were beginning to pass them on to customers as pre-tariff inventories became depleted or as pressures to preserve margins grew more acute," the Fed wrote.
Consumers Hesitate as Prices Rise
The consequence of these price hikes is a more cautious consumer, particularly among those on lower and middle incomes. The Fed noted that these shoppers are becoming "increasingly price sensitive and hesitant to spend on nonessential goods and services."
This trend follows the sweeping tariffs announced by President Trump on "Liberation Day" in April, which applied to imports from dozens of nations. The policy has fuelled significant anxiety. A separate Goldman Sachs report from October indicated that 37 percent of companies were already passing the costs to consumers by that point.
Elevated Prices Likely to Persist
Looking forward, the Federal Reserve suggests that while the rapid rate of price increases may slow, costs are expected to stay high. "Firms expect some moderation in price growth, but [anticipate] prices to remain elevated as they work through increased costs," the report stated.
This moderation will appear at different times for various products. For instance, the Fed pointed out that although most tariffs on coffee have been lifted, coffee roasters are unlikely to lower their prices until they sell off all inventory bought during the tariff period.
Amid the concerns over tariffs and consumer spending, the January Beige Book did contain some positive signals. It noted an increase in economic activity in several key regions, including those around the Federal Reserve banks in San Francisco, Dallas, Atlanta, and New York. This marks an improvement after three consecutive reports highlighted stagnant growth.
