A Gloomy Outlook for Businesses Wary of Tariffs
Economic Hardship for Our Websites: Duke-Fed Survey Indicates Price Increases Might Not be Sufficient Against Tariff Concerns
In the buzzing world of businesses, those keeping a close eye on tariffs are bracing for hefty price hikes in the upcoming year as anxiety about trade policy reaches an all-time high, according to the latest quarterly survey by Duke University and the Federal Reserve Banks of Richmond and Atlanta.
Forty percent of businesses marked tariffs and trade policy as a top priority in Q2 of 2025, setting a new post-pandemic record in this category. The level of concern in this sector even surpassed figures seen during the pandemic's peak and the height of U.S.-China trade tensions [3].
Financial heads either fretting about tariffs or working alongside other tariff-anxious executives are projecting a 6.6% price increase and a 6.6% growth in unit input costs compared to a mere 3.2% and 3.9% respectively among those unbothered by tariffs [2].
This tense scenario could lead to a challenging situation for tariff-wary businesses. If the projected nominal revenue growth for tariff-preoccupied businesses holds to the survey data (4.8%), it falls short of the projected price increases, which means negative real revenue growth for these enterprises. Essentially, tariff-wearied businesses may earn more per unit or service, but they will charge more while selling less, resulting in a financial loss [1].
Atlanta Fed economist Brent Meyer highlighted this trend in his official survey comments, stating, "The most striking aspect of the outlook for those reporting tariffs and trade policy as a pressing concern is that their nominal sales revenue expectations do not outpace their price growth projections, implying contracting real revenue growth in 2025" [1].
Although the majority of businesses haven't yet raised prices in response to tariffs, just 41% of businesses revealed they have or plan to pass tariff-related cost increases to their customers. This suggests that the true impact of the Trump administration's trade policies remains uncertain [2].
Amusingly, many businesses unconcerned about tariffs (much like last quarter's report) remain idle [2].
Deteriorating Economic Confidence
There's a dramatic shift in overall economic optimism across the surveyed businesses, a stark contrast to the positive sentiment at the end of last year. Respondents have shrunk their median real GDP growth forecast to 1.4%, down from 1.9% in Q1. The possibility of economic recession also rose significantly, jumping from 15% in Q1 to 23% in the current survey [3].
Tariff-wary businesses displayed a more pessimistic outlook compared to their counterparts. Beyond macroeconomic indicators, the data shows that tariffs are already influence financial decision-making. Forty-one percent of the businesses admitted they have delayed, scaled down, put off indefinitely, or canceled investment plans during the first half of 2025 due to trade-related uncertainty [3].
The Q2 2025 survey by Duke University's Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta contains responses from approximately 465 U.S. firms. However, the exact number varies slightly by question.
For example, firm-level forecasts like revenue or cost growth include responses from 451 to 496 firms, while macroeconomic expectations such as GDP projections are based on answers from 465 firms. The survey was conducted between May 19 and June 6, 2025.
[1] https://www.duke.edu/news/ceos-report-reduced-optimism-economic-outlook-q2-2025[2] https://www.marketwatch.com/story/commercial-executives-forecasting-pricing-pain-as-tariff-tensions-persist-with-venezuela-edging-into-the-mix-11562414730[3] https://www.reuters.com/business/us-business-survey-us-ceos-ddim-optimism-amid-tariff-tensions-2025-06-28/[4] https://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm[5] https://www.federalreserve.gov/releases/g17/current/
- Due to the growing concern over tariffs, financial heads in businesses are projecting a significant margin increase, with a 6.6% growth in unit input costs compared to those unfazed by tariffs.
- The projected nominal revenue growth for tariff-preoccupied businesses (4.8%) may not outpace the projected price increases, potentially leading to a negative real revenue growth for these enterprises.
- The survey also reveals that tariff-wary businesses are exhibiting a more pessimistic outlook, with 41% of them having delayed, scaled down, or cancelled investment plans due to trade-related uncertainty.
- The economic confidence among businesses, especially those concerned about tariffs, is deteriorating, with a shrunken median real GDP growth forecast (1.4%), a rise in the possibility of economic recession (from 15% to 23%), and a shift in overall economic optimism compared to the end of last year.
