Texas firms expect partial but swift pass through of tariff costs

HOUSTON (ICIS)–Businesses in the chemical-heavy US state of Texas expect a partial but swift pass through of the costs they expect to bear from the nation’s tariffs, the Federal Reserve Bank of Dallas said on Friday.

The Dallas bank is one of 12 regional branches of the nation’s central bank, and it based its findings on the Texas Outlook Surveys it conducted for the first quarter.

More than half of Texas businesses said they expect to pass through costs within a month of the tariff proposals and announcements, as shown in the following chart.

Passing through costs was the most common response to the tariffs among Texas businesses, especially among manufactures, as shown in the following chart.

Chemical companies discussed similar strategies during their recent earnings conference calls.

Passing through all of the costs of the tariffs is unlikely because Texas business are pessimistic about the outlook of the economy, the Dallas bank said.

The new order indices turned negative in April for the Texas Manufacturing Outlook Survey (TMOS) and a composite of the surveys conducted by the Federal Reserve. Services slowed according to the Texas Business Outlook Survey and other surveys from the regional banks of the Federal Reserve.

Although tariff pass throughs will be partial, Texas businesses still expect they will happen, and that should increase inflation, according to the Dallas bank.

Thumbnail Photo: The flag of the US state of Texas, which is home to many refineries and petrochemical plants. (By Westlight)