Trump has created a ‘trickle up’ tariff economy that means U.S. companies aren’t done hiking consumer prices over import taxes

The Federal Reserve of New York found that nearly half of service firms and manufacturers anticipated raising prices as a result of tariffs.

President Donald Trump isn’t done implementing this tariff policy, and U.S. companies aren’t done raising prices in response.

Businesses are still adjusting prices to account for levies and the ongoing uncertainty surrounding them, the Federal Reserve of New York said in a post published on Wednesday. Citing recent regional business surveys, the New York Fed found that 47% of service firms are planning more tariff price increases, including 31% within the next six months and 44% of manufacturers plan to hike prices, including 37% in the next six months.

“While economists and policymakers often expect that price increases due to tariffs will constitute a one-time price-level adjustment,” the Fed economists wrote, “what ‘one-time’ means in practice may be a drawn-out affair, especially when the tariffs change frequently.”

These predicted price increases are for two main reasons, according to the New York Fed: Some companies are under contracts with fixed selling prices, meaning they were unable to increase retail prices until contracts expired and spent the duration of that agreement absorbing costs. Other businesses, however, have implemented a “trickle up” strategy to price hikes, economists wrote, where they increase costs slowly over time. It’s a boil-the-frog pricing approach that allows them to recoup tariff costs through higher prices, while passing down expenses to consumers slowly to avoid sticker shock. This tactic also gives firms flexibility to accelerate price hikes should tariff rates increase.

Spice brand McCormick & Company may be one company to employ a more staggered pricing strategy. Last month in an earnings presentation, CEO Brendan Foley called the company’s price increases—including one last September and other in February—“surgical,” saying the tactic, as well as $31 million in tariff refunds, helped expand gross profit margins last quarter. 

Following the Supreme Court striking down tariffs Trump imposed under the International Emergency Economic Powers Act (IEEPA)—which generated $166 billion in tariff revenue—the administration has worked to recreate the sweeping import taxes through different means, including temporary levies under Section 122 of the 1974 Trade Act, as well as Section 301, which outlines tariffs on countries with trade practices deemed unreasonable or discriminatory. On Tuesday, the U.S. Trade Representative began its three-day hearing to determine if the 60 countries it investigated in March failed to block the exportation of forced-labor products. 

The import taxes were a gut bunch to U.S. importers, which Fed data showed were overwhelmingly shouldering the burden of the levies, despite Trump’s promises that exporters would pay the increased costs. Last year, American companies and consumers paid for nearly 90% of the tariffs.

How consumers are feeling tariff impacts

Regardless of companies’ pricing strategies, Fed economists have already noticed a measurable inflationary impact of Trump’s tariffs. A May study from the Federal Reserve Bank of Dallas found a year-over-year core inflation hit 3.2% in March, the highest level recorded in three years, which it attributed to surging tariff costs. The economists calculated that without the levies, inflation would be about 0.80% lower, sitting at around 2.3%.

This inflation, over the course of more than a year, is adding up: A Tax Foundation report from February projected tariffs to cost Americans $700 per household in 2026, following an estimation that the levies led to an average tax increase of $1,000 per household in 2025.

Separate Federal Reserve research published in April suggests consumers will continue to feel pinched by tariffs, as it will likely take months for passed down costs to reach them. This is because companies tend to work to preserve profit margins in the face of variables like tariffs and took aggressive action to dodge the brunt of the tariffs following their announcements, such as stockpiling goods. Still, the economists said consumers will experience the impact of continued tariff pressure eventually.

“If retailers’ acquisition costs for a good rise $1 because of tariffs, they charge $1 more for that good seven months later,” the authors wrote.

This story was originally featured on Fortune.com