We’re about to find out who’s really paying for tariffs

• Earnings season gets going in earnest this week, giving investors a fuller picture of how tariffs are impacting the bottom line—and specifically how much of the cost is being eaten by companies and how much is being passed on to consumers. So far, tariffs have yet to fuel a surge in inflation, but their effects are expected to show up more later this year.

Earnings for the second quarter will heat up this week, with more at stake than usual as they represent a fuller picture on how tariffs are actually affecting businesses and consumers.

The top U.S. banks will report, starting with JPMorgan Chase, Citigroup and Wells Fargo on Tuesday. In the tech sector, streaming leader Netflix and chip giant TSMC report on Thursday. Among industrials, results from Alcoa, GE Aerospace, and 3M are also due this week.

The consensus estimate on Wall Street is that earnings from S&P 500 companies grew just 4% in the second quarter from a year ago, the slowest pace since 2023 and down from first-quarter growth of 13%.

That comes as President Donald Trump’s trade war has yet to fuel a big inflation inflation spike, though tariffs are expected to show up more in economic data later this year.

The consumer price index will come out on Tuesday, and analysts expect a 0.3% monthly increase for June, up from May’s 0.1% pace. The producer price index is due on Wednesday, and is also expected to show acceleration to 0.2% from 0.1%.

The uptick could be a due to companies running out of inventories that were stockpiled ahead of the tariffs, forcing them to incorporate more of those costs in the price of their goods.

Capital Economics said last week that Wall Street doesn’t see Corporate America shouldering much of the future tariff burden, and exporters don’t appear to be cutting their prices aggressively to offset the tariffs.

A survey published last week by KPMG found more than 80% of companies plan to hike prices in the next six months, and 73% said they have already passed on up to half of tariff-related costs to consumers. But that was still not enough to preserve earnings, as 57% of firms said their gross margins are falling.

Meanwhile, economists at Goldman Sachs expect companies will pass on 70% of tariff costs to consumers via higher prices, according to a note earlier this month.

If that pans out, it would be a heavier blow than some earlier forecasts. Chris Harvey, Wells Fargo Securities’ head of equity strategy, said if tariffs settle around 10%, then a third of the cost could be eaten by the importer, a third by companies, and a third by consumers.

“That’s not a big impact,” he told CNBC on May 30.

That 10% target looks increasingly optimistic, as Trump has continued to push for aggressive rates. Goldman Sachs expects the effective rate to eventually settle around 17%.

But companies that pass on tariff costs also risk a backlash. The KPMG survey said 34% of companies said customer pushback is a challenge, and 45% said sales are already beginning to dip.

And there’s one consumer in particular that companies need to avoid annoying: Trump. In May, he warned Walmart not to hike prices after the retail giant said on an earnings call that prices could go up on a wide array of products.

“Walmart should STOP trying to blame Tariffs as the reason for raising prices throughout the chain,” Trump posted on Truth Social. “Walmart made BILLIONS OF DOLLARS last year, far more than expected. Between Walmart and China they should, as is said, ‘EAT THE TARIFFS,’ and not charge valued customers ANYTHING. I’ll be watching, and so will your customers!!!”

Capital Economics said last week it suspects U.S. firms will eat more costs, “if only in the short run for political reasons.”

Either way, the upcoming earnings reports will reveal more definitively who is eating how much. More pain on the consumer side could fuel inflation and prevent the Federal Reserve from lowering rates, weighing on the stock market. More pain on the corporate side will erode earnings—and also weigh on the stock market.

This story was originally featured on Fortune.com