By Dwi Wanna 
By PYMNTS | July 8, 2026
More than a year after the first wave of tariffs under the current Trump administration was implemented, the American economy finds itself navigating a prolonged period of inflationary pressure. According to a new analysis published Wednesday by economists at the Federal Reserve Bank of New York, the “tariff shock” has not been a singular event, but rather a slow-moving, persistent force. Approximately half of all U.S. businesses continue to raise prices to offset the burden of import duties, signaling that the economic ripples of protectionist trade policy are far from subsiding.
The State of Play: Persistent Price Hikes
The New York Fed’s latest survey highlights a critical reality for American consumers: the impact of tariffs is not yet fully reflected in the price tags at local retailers. While the headlines often focus on the initial implementation of trade barriers, the reality on the ground is a phased approach to price escalation.
For many businesses, the tariff burden is being managed through a "drip-feed" strategy. Among service firms that have been forced to pay tariffs, 31% explicitly plan to increase their prices in response to these costs within the next six months. A further 16% have signaled that they will wait until after that six-month window to adjust their pricing models.
The manufacturing sector, which is more deeply integrated into global supply chains, shows similar trends. Among tariff-paying manufacturers, 37% intend to raise prices within the next half-year, with another 7% planning for adjustments beyond that timeframe. This data suggests that the "pass-through" process—the mechanism by which businesses transfer the cost of import taxes to the end consumer—is expected to continue well into 2027.
A Chronology of the Tariff Cycle
To understand the current economic environment, one must trace the timeline of the administration’s trade policy and the corresponding business reactions.
- Early 2025 (The Implementation Phase): The administration rolled out its primary tariff packages, aiming to incentivize domestic production and reduce trade deficits. Almost immediately, the market reacted with volatility as importers scrambled to assess the impact on their bottom lines.
- April 2025 (The Initial Pass-Through): Data from the New York Fed indicated that roughly three-quarters of companies across both service and manufacturing sectors had already begun passing higher input costs directly to consumers. At this stage, the impact was immediate and largely reactive.
- November 2025 (The Shift in Burden): By late 2025, the economic dynamics showed a slight shift. Research suggested that while U.S. importers were still bearing the brunt of the costs (roughly 86%), foreign exporters had begun to absorb some of the impact by lowering their prices to remain competitive in the U.S. market, accounting for a 14% share of the tariff burden.
- July 2026 (The Long Tail): We have now entered a phase of “incremental adjustment.” Businesses are no longer reacting in a panic; they are strategizing to manage long-term margin compression through contract-based pricing and staggered consumer price increases.
Understanding the Delay: Why Are Companies Waiting?
The New York Fed’s report provides crucial insight into why companies have chosen to spread out price increases rather than passing costs along in one swift move. The reasons are primarily structural and strategic.
Contractual Obligations
A significant portion of the delay stems from existing business-to-business (B2B) contracts. Many firms are locked into long-term pricing agreements that prevent them from adjusting their rates until those contracts reach their expiration date. As these contracts roll over, companies are baking in the higher tariff costs, ensuring that price increases are spread out over several quarters or years.
Strategic Gradualism
Businesses are also wary of "sticker shock." Raising prices too aggressively or too suddenly risks alienating customers and damaging long-term brand loyalty. By implementing incremental price hikes, firms hope to condition their customer base to the new price equilibrium without triggering a sudden drop in demand.
Market Uncertainty
Perhaps the most significant driver of the slow-burn approach is the pervasive uncertainty surrounding future trade policy. Economists noted that the potential for rate changes, new exemptions, or retaliatory measures from trading partners creates an environment where businesses are hesitant to make large, discrete adjustments. Instead, they adopt a “wait-and-see” strategy.
"This behavior extends the period over which tariff-related price pressures work their way through the economy," the New York Fed economists wrote. In essence, the uncertainty of policy itself is acting as an inflationary mechanism.
Data Analysis: The Scope of the Tariff Impact
The survey findings reveal the deep integration of imports within the American business landscape. Two-thirds of service firms and nearly all manufacturers report that they import at least some of their inputs.
Of these firms, 40% of service-sector businesses and 70% of manufacturers confirmed they had directly paid tariffs over the previous 12 months. When asked about their current status regarding these costs:
- Full Pass-Through: 29% of service firms and 18% of manufacturers have successfully passed the full cost of tariffs onto their customers through price hikes.
- The "No-Change" Group: 21% of service firms and 30% of manufacturers have opted to absorb the costs, stating they do not plan further price hikes.
- Minimal Impact: A small minority (3% of service firms and 8% of manufacturers) reported that tariffs had little to no impact on their cost structure.
This data underscores a significant divide between industries. Manufacturers, often operating on thinner margins and relying heavily on raw material imports, are more sensitive to these costs than service-based firms. However, their ability to pass on those costs is hampered by intense global competition.
The Competitive Divide: Large vs. Small
The PYMNTS Intelligence report, “How Middle-Market Business Uncertainty Rewrote 2025,” adds a layer of nuance to these findings. The study highlights a growing disparity between large corporations and their smaller counterparts.
Larger companies, which typically possess greater economies of scale, have been far more successful in navigating the tariff environment. They have the resources to:
- Pivot Supply Chains: Larger firms can more easily switch to domestic or non-tariffed international suppliers.
- Product Rationalization: They have the flexibility to drop underperforming or high-cost product lines that are heavily impacted by tariffs, effectively protecting their overall profit margins.
- Pricing Power: They maintain enough market share to implement price increases with less fear of losing customers to competitors.
Conversely, small-to-mid-sized businesses often lack these levers. They are frequently trapped by their reliance on specific, tariff-heavy suppliers and lack the pricing power to shift costs onto the consumer, leading to significant pressure on their bottom lines.
Implications for the Future
The implications of this ongoing tariff pass-through are profound for both policymakers and consumers.
For the Consumer
Inflationary pressures on consumer goods are likely to remain sticky. Because the pass-through is happening in waves, consumers may find that even as the initial shock of a specific tariff fades, the price of goods continues to climb as new contracts take effect.
For the Economy
The "long tail" of tariff impacts suggests that the Federal Reserve and other economic observers must account for these structural price adjustments in their inflation forecasts. The uncertainty that leads to incremental price hikes complicates the task of monetary policy, as it creates a steady, predictable—but persistent—upward pressure on the Consumer Price Index (CPI).
For Business Strategy
The era of "set-and-forget" pricing is over. Firms must now maintain high-level trade compliance teams and dynamic pricing models that can react to the shifting landscape of global trade. The ability to forecast tariff changes—and the corresponding reaction of competitors—has become a core competency for survival in the current climate.
As the U.S. moves deeper into the second half of 2026, the data from the New York Fed serves as a clear indicator: the costs of the current trade policy are being socialized across the entire economy, and for the average American household, the fiscal impact of these decisions is far from over. Whether this strategy will ultimately achieve its intended goals of industrial reshoring remains a subject of intense debate, but the short-term reality is one of enduring, managed price inflation.
Layla Zulfa 
Nana 
Basiran 