New research from the Federal Reserve Bank of New York’s Liberty Street Economics blog, published July 9, 2026, confirms what many small business owners already know from their own P&L: tariffs are still working their way through pricing, and the pass-through isn’t finished.
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What happened
Drawing on the 2025 Small Business Credit Survey — fielded September through November 2025 with roughly 6,500 respondents nationally, including 976 in the New York Fed’s Second District — the research found that about 80% of goods and retail firms nationally passed on at least some of their higher import costs to customers, while about 60% absorbed some of the cost themselves. A meaningful share, 36% of goods firms and 43% of retail firms, did both: raising some prices while eating part of the cost elsewhere.
Exposure to tariffs varied sharply by sector. Nationally, 55% of goods firms and 67% of retail firms reported tariff-related challenges in 2025, compared to 34% of services firms. Import dependence explains much of the gap: 70% of goods firms and 80% of retail firms use imported inputs, and 80% of firms overall reported higher prices for those imported inputs during the year.
Critically, the pass-through isn’t over. The research notes many firms that have already raised prices are planning additional increases, some more than six months out — a signal that 2026 price adjustments tied to 2025 tariffs are still working through the pipeline.
Why it matters
Firms that reported the biggest tariff-related challenges in 2025 were also the most pessimistic about their 2026 outlook — less likely to expect revenue or employment growth, and more likely to expect export sales to decline. For a small business, that combination — rising input costs, planned price hikes still ahead, and a business owner already bracing for a weaker year — is a margin problem that doesn’t resolve itself with one round of price increases.
What this means for small business owners
If your business imports goods, materials, or components, this research is a reminder to model tariff exposure the same way you’d model any other input cost: track it by product line, not just as a lump sum on the income statement. Businesses that absorbed costs through 2025 rather than passing them on are the ones most likely to still have price increases ahead — know which category you’re in before you set 2026 budgets.
This is also a good moment to revisit vendor contracts and sourcing. If a supplier’s tariff-driven cost increases haven’t been fully reflected in your pricing yet, waiting longer only compresses margin further. Clean, current cost-of-goods-sold tracking makes it much easier to see exactly where tariff costs are landing and to decide, deliberately, how much to pass through versus absorb.
“Firms that faced greater tariff challenges in 2025 were more pessimistic about employment and revenues in 2026.” — Federal Reserve Bank of New York, Liberty Street Economics
The bottom line
Tariff costs aren’t a one-time hit that already happened — the New York Fed’s data shows the pass-through is ongoing, with more price increases still ahead for a meaningful share of import-dependent small businesses. Knowing exactly how tariffs are flowing through your own cost structure is the difference between a planned price adjustment and a margin surprise later in the year.
