Tariff Stress Is Turning Inflation Into the CFOs Working Capital Test

The latest producer price data suggest that inflation is no longer being driven primarily by what businesses pay for goods, but by what those enterprises decide to charge as those goods move through the system.

February’s Producer Price Index (PPI) came in above expectations, rising 0.7% for the month and 3.4% year over year, with core prices advancing 0.5% on the month and 3.9% annually, according to the Bureau of Labor Statistics.

The data, released Wednesday (March 18), shows that the pressure is not concentrated in raw materials alone. It is showing up in the decisions made between factory and storefront, where pricing is increasingly shaped by distribution costs, service fees and margin management.

Where Inflation Is Actually Forming

The February report reinforces some forces through the supply chain channels that have been building over several months. Services costs rose 0.5%, with gains in areas such as portfolio management and brokerage activity contributing to the increase.

At the same time, goods prices moved higher by 1.1%, with food and energy both advancing. Food prices rose 2.4%, including a pronounced 48.9% increase in vegetable prices, while energy climbed 2.3%.

The data also gives detail on how costs are handled after they enter the system. Trade indexes, which capture the spread earned by wholesalers and retailers, have been rising, indicating that businesses are not simply passing along higher costs. They are recalibrating pricing as products move through logistics, storage and distribution.

This creates a different form of inflation. Even when certain input costs stabilize, prices can remain elevated because the structure of the supply chain has changed. Each layer adds its own adjustment, and those adjustments accumulate.

Tariffs Are Redrawing the Map

The pricing behavior seen in the PPI data cannot be separated from the broader policy environment.

PYMNTS Intelligence findings from a late-2025 Certainty Project show that exposure to international suppliers and the volatility of tariffs is now a dividing line in business performance. Companies with significant global sourcing report higher uncertainty, weaker margins and more pronounced operational strain.

Six in 10 CFOs at those firms say the regulatory environment lacks predictability, compared with just 15% among firms that rely more heavily on domestic suppliers.

Price increases, meanwhile, have not resolved the pressure. Three in four businesses raised prices, yet 58% report declining profit margins.

Consumers See the Effects With a Delay

For consumers, the impact is uneven but persistent. The path from producer prices to retail prices is never immediate, and it’s also not linear. However, when inflation is embedded in distribution and margin decisions, it tends to linger.

That dynamic is beginning to show in consumer behavior. Households are adjusting how they pay, using installment options and credit to manage variability in everyday expenses. Those adjustments come as demand is also “reacting.” Nearly half of CFOs report that macroeconomic and regulatory uncertainty are reducing customer demand, with the effect more pronounced among firms exposed to global supply chains.

Managing Through a Different Kind of Inflation

PYMNTS Intelligence indicates that companies are focusing more closely on liquidity, payment timing and supplier relationships. Working capital strategies, predictive analytics and flexible payment methods are being used to manage both cash flow and uncertainty.

A clearer pattern in the PYMNTS Intelligence data is that firms are not treating inflation as a pricing problem alone, but as an operational discipline. The Growth Corporates Working Capital Index shows that 85% of middle-market firms are using working capital solutions, while 42% are deploying artificial intelligence to forecast demand, model tariff exposure and better align payables with receivables.

These efforts are paired with more deliberate payment strategies, including earlier supplier payments to secure terms and increased use of commercial and virtual cards to maintain liquidity while settling obligations. The common denominator is visibility. Firms that can see cash flows and cost pressures in advance are better positioned to decide when to absorb inflation and when to pass it along, which ultimately determines how sharply those pressures are felt downstream.