SORCE Insights: An Initial Look at the Anticipated Impact of Tariffs on Fourth District Businesses

Figure 2 highlights the percentage of respondents from each industry who said that tariffs would impact their business. Eighty-two percent of retail respondents, 75 percent of manufacturing respondents, and 70 percent of construction and real estate respondents said that tariffs would impact their business. A much smaller percentage of respondents in financial services (38 percent), transportation (38 percent), and professional and business services (21 percent) said that their business would be impacted.

Respondents who said that their business would be impacted by tariffs were asked additional questions. These questions assessed whether they anticipated that tariffs would increase, decrease, or have no effect on demand, input costs, selling prices, and employment (Figure 3). Sixty percent of those respondents said that demand for their products or services would decrease because of tariffs, 31 percent anticipated no change in demand, and 9 percent said that demand would increase.

A strong majority (85 percent) of these respondents said that tariffs would increase their input costs, while another 12 percent expected no change in their input costs. Seventy-five percent of these respondents said that tariffs would cause them to increase their selling prices, 19 percent expected no change in their selling prices, and 6 percent anticipated that they would decrease their selling prices. Finally, while the vast majority (75 percent) of respondents said that tariffs would not cause any change in their employment, 22 percent said that tariffs would cause a decrease in their employment.

We then asked respondents who said that their business would be impacted by tariffs to describe what actions, if any, they expect to take or were taking in anticipation of tariffs (Figure 4). Forty-six percent of these respondents said that they were passing or anticipated passing cost increases through to customers, and 29 percent said that they planned to seek or were actively seeking new domestic suppliers. Twenty-seven percent indicated that they were pulling forward purchases ahead of potential tariffs. Finally, 13 percent said that they were seeking or anticipated seeking new foreign suppliers, and 4 percent said that they were exploring bringing outsourced production or processes in-house.

Finally, we asked a question to assess the environment in which respondents would be attempting to pass price increases along to customers in response to tariffs (Figure 5). Respondents were asked to compare the ease of passing along price increases to customers versus one year ago. A combined 48 percent of respondents said it was somewhat or significantly harder than one year ago to pass along price increases to customers. Thirty-eight percent of respondents said there was no change in the ability to pass along price increases, while a combined 14 percent said it was somewhat or much easier to pass along price increases to customers compared to one year ago.

Conclusion

In the Cleveland Fed SORCE administered in February 2025, a majority of respondents (64 percent) indicated that their business would be impacted by tariffs on imports. Respondents in retail, manufacturing, and construction and real estate were more likely to anticipate being impacted by tariffs than contacts in financial services, transportation, and professional and business services. Sizable majorities of respondents expected tariffs to increase both input costs and selling prices while decreasing demand for their products and services. In anticipation of the potential effects of tariffs, respondents indicated that they were taking or are expecting to take a variety of actions including seeking new domestic suppliers, pulling forward purchases, and passing along increased costs to consumers. However, many respondents anticipated that it would be more difficult to pass along higher costs to their customers compared to one year ago.