SORCE Insights: Tariff-Related Uncertainty and Pass-Through to Pricing

Introduction

In the Survey of Regional Conditions and Expectations (SORCE) fielded in June 2025, the Cleveland Fed asked respondents a set of special questions about the impact of tariffs and tariff-related uncertainty on costs, selling prices, staffing, and capital expenditure plans. Most respondents (64 percent) said that they were incurring costs caused by uncertainty over tariff rates, the direct expenses of paying tariffs, or both. Of these respondents, 68 percent expected to pass through at least some of those costs to their customers. About one in five firms said that they had scaled back plans to hire staff or make capital expenditures because of uncertainty over tariff rates.

Analysis

In numerous conversations this spring, business leaders stated that, in addition to the higher tariff rates themselves, the uncertainty caused by the frequent changes to these rates was also elevating their costs. Thus, one of the special questions in the June 2025 SORCE aimed to quantify how widespread these uncertainty-related costs had been. Forty-six percent of respondents said that uncertainty about tariff rates was causing increases in their costs. This includes 17 percent of respondents who reported that, over the last six months, their costs had increased because of uncertainty about tariffs but not because of tariffs directly.

Figure 1. Cost Increases Caused by Tariffs and Tariff-Related Uncertainty