Monitoring Shifts in Trade Policy

Over the last two years, the shifting sands of trade policy have added uncertainty to the U.S. economy. The big question has been how much this has affected companies and consumers and influenced their spending. The Federal Reserve Bank of Richmond has been using its surveys and conversations with business contacts to find out.

In general, understanding the impact of trade policy isn't easy. "It requires predicting how both firms and consumers will react to policy changes," says Zach Edwards, a research analyst in the Richmond Fed's Applied Analysis team. "This is a fundamentally difficult task given the range of strategic responses and market conditions involved."

For example, figuring out which goods are affected by changes in trade policy can quickly become complicated. "You have to analyze whether substitutes exist for the specific good and country combination, particularly if importers are bearing the tariff costs," explains Edwards. "Even without substitutes, firms may not actually pay tariffs due to various avoidance strategies, including preordering or building inventory before tariffs take effect."

This points to another complication with determining the impact of trade policy changes — the difference between announced tariff rates and the actual tariffs faced by foreign exporters. For instance, a 19 percent tariff on imports from Cambodia may sound high, but some goods are excluded from tariffs, and the country accounts for less than 1 percent of U.S. imports. Richmond Fed researchers, led by senior economist and research advisor Marina Azzimonti, used detailed trade data published by the U.S. Census Bureau to calculate average effective tariff rates.

Data analysis can also be used to identify which firms bear the heaviest tariff burdens passed down from exporters, notes Edwards. Then, executives and managers at those businesses can be surveyed about how they are handling the added costs.

The Richmond Fed's survey team added special questions about trade policy to its monthly regional surveys of Fifth District manufacturers and non-manufacturers in March, May, and August 2025. Based on this information, they calculated growth in prices paid for inputs by whether respondents said they were affected by tariffs. According to Edwards, firms had already passed along half (or more) of tariff increases to their customers by August 2025, and they expected to pass even more through in the coming year.

The CFO Survey, administered by the Richmond and Atlanta Feds along with Duke University's Fuqua School of Business, has included questions about tariffs four times since the first quarter of 2025. The responses over time from chief financial officers and other executives in financial decision-making roles have yielded many insights.

"Respondents initially expected extreme impacts, but they moderated their near-term expectations while increasing longer-term forecasts," describes Edwards. "This suggests that the actual implementation of tariffs differed from initial fears, and some impacts materialized later than anticipated."

While the Richmond Fed's survey team has analyzed the impacts of trade policy changes, its regional executives have leveraged their relationships with business leaders in the Fifth District. Renee Haltom, regional executive and vice president of sensing, engagement, and publications at the Richmond Fed, discussed this aspect of the Bank's economic sensing during an April 2026 episode of the Richmond Fed's Speaking of the Economy podcast.

"Some of these conversations were regular updates that we have with businesses to keep a general pulse on the economy," said Haltom. "In the last year, many of these conversations were specifically set up to better understand the implications of big changes in the industries most impacted by tariffs."

For example, regional executives increased their outreach to contacts at the port authorities in Baltimore, Md.; Norfolk, Va.; and Charleston, S.C., as well as to manufacturers and retailers. They also targeted some of the "tariff hot spots" identified in Azzimonti's analysis of estimated tariff impacts by county.

One message from business contacts was loud and clear: Most of them wanted to pass along tariff costs to customers but didn't feel they could, or not very easily. Business-to-business firms say they have been finding it easier to pass along tariff costs, said Haltom, while business-to-consumer firms have faced more pushback.

While there haven't been as many tariff changes in 2026 by comparison, some interesting issues remain, based on Haltom's more recent assessment of regional economic conditions.

"Firms have received billions in tariff refunds following the Supreme Court ruling — does that basically operate like a tariff in reverse?" she asks. "And how are global supply chains adapting to a world where tariff risk is higher? Thanks to our rich network of business contacts, we can check in with firms over time to learn with them."