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.
