Survey: Tariff Costs to Push US Prices Higher in 2026
A recent survey showed that US companies are preparing to raise product prices again in 2026 as they continue to recover from the impact of elevated tariffs that have increased costs in recent periods.
Michael Gapen of Morgan Stanley said the latest GDP data indicate that companies have already taken significant steps to recoup tariff costs through higher prices, helping restore profitability and reduce recession risks.
Tariffs sharply pushed up non-labor costs over the past two quarters, initially leading companies to slow hiring and experience profit declines.
However, in the third quarter, firms managed to pass on more of those costs to consumers.
Survey data now suggest that companies plan to implement further price increases in 2026.
If successful, Morgan Stanley expects inflation to stabilize while avoiding widespread layoffs.
Gapen added that some companies may opt for tighter cost controls that could weaken the labor market, while others may benefit from higher productivity that can rebuild profits without causing significant inflationary pressure.
Morgan Stanley emphasized that a large share of tariff costs will likely continue to be passed on to consumers, as supply-chain adjustments are largely complete and exporters are less likely to absorb further costs.
These developments support the bank’s outlook for a return to modest growth in the US economy in 2026, with risks increasingly tilted to the upside.
Michael Gapen of Morgan Stanley said the latest GDP data indicate that companies have already taken significant steps to recoup tariff costs through higher prices, helping restore profitability and reduce recession risks.
Tariffs sharply pushed up non-labor costs over the past two quarters, initially leading companies to slow hiring and experience profit declines.
However, in the third quarter, firms managed to pass on more of those costs to consumers.
Survey data now suggest that companies plan to implement further price increases in 2026.
If successful, Morgan Stanley expects inflation to stabilize while avoiding widespread layoffs.
Gapen added that some companies may opt for tighter cost controls that could weaken the labor market, while others may benefit from higher productivity that can rebuild profits without causing significant inflationary pressure.
Morgan Stanley emphasized that a large share of tariff costs will likely continue to be passed on to consumers, as supply-chain adjustments are largely complete and exporters are less likely to absorb further costs.
These developments support the bank’s outlook for a return to modest growth in the US economy in 2026, with risks increasingly tilted to the upside.
