The implemented tariff policy of the former Trump administration has ushered in an era of heightened economic challenges. The shopping public now grapples with the increase in nationwide prices due to a baseline 10% tariff on all goods entering the United States from other countries. The inevitable outcome is that consumers might have to shoulder higher costs. The additional tariff threat against about 60 countries promises a higher reciprocal arrangement, set to resume after a 90-day negotiation hiatus ending in July. Various industries such as retail, technology, and car manufacturing, where many U.S. companies have production centers overseas, are feeling the pressure of these tariffs.
A comprehensive view of the new tariff’s impact on the retail sector reveals growing concerns. As of April 5, tariffs were imposed on all nations except China, with which the U.S. has been locked in contentious trade negotiations. May 12 marked a key milestone as a preliminary agreement was struck to slash reciprocal tariffs to a total of 30%. However, the accrued costs of multiple layers of tariffs enforced during the trade standoff have propagated through to the retail sector, plaguing imports. Moreover, looming threats of a 50% tariff imposition on the European Union since May 23 further complicate the picture.
Companies like Amazon and Home Depot have provided insights into the impact of these tariffs. Their observations highlight how increased costs borne by the company might not necessarily translate to consumers since there’s no noticeable decline in customer spending. Thus, there may be no compelling reason for these companies to transfer their expenses onto the consumer.
The retail giant, Target, doesn’t appear to hold the same sentiment. Following their reported dip in earnings for May, Target openly acknowledged the potential for an increase in prices due to the tariffs. Their focus is on managing price stability, but they foresee a likely rise in produce costs.
Walmart also foresees the tariffs’ impacts filtering down to the end consumers. The multinational retail corporation has predicted tariff-driven price increments by the end of May, with additional surges the following month.
Adidas, the sportswear manufacturer, has signaled the potential need to escalate the prices of its products as a response to the higher tariffs. However, the ongoing discussions mean the company is yet to settle on the specific price adjustments.
Procter & Gamble, another industry giant, is grappling with the need to increase prices to counterbalance the effect of tariffs, despite efforts to cushion the impact.
Consumer electronics retailer, Best Buy, has also indicated its intent to raise prices in response to the newly imposed tariffs.
Toy producer, Mattel, is contemplating a change in its production strategies, given that a significant chunk of its products – about 40% – originates from China.
The technology sector has not been spared either. In May, threats emerged of a minimum 25% import tax to be levied on tech companies sourcing products from Asia. Any such tariff would be indiscriminate, affecting all companies in the tech sector alike.
In the automobile industry, repercussions of the Trump’s tariff policies are equally felt. All imported vehicles have been faced with a 25% tariff, as well as an added 25% on imported steel and aluminum. Auto components too face a similar 25% tariff. Interestingly, if foreign car parts are used in domestic manufacturing, a partial reimbursement of the levy is possible, but the exact process is unclear as most automanufacturers remain tight-lipped on how these tariffs translate to consumer prices.
Japanese automakers like Toyota, Honda, and Nissan are facing severe economic challenges, with estimates suggesting their financial growth may be halved during the year. For instance, Toyota is bracing itself for considerable financial losses due to new auto tariffs.
However, for Ford Motor, the economic impact is expected to be lower since most of its manufacturing occurs domestically. However, imported parts could still be subject to the 25% tariff rate.
Early in May, General Motors announced their damage control strategy. They expect to offset at least 30% of cost increases attributed to tariffs.
Another ripple in the economic tariff policy hit the film industry when a 100% tariff on non-U.S. made films was announced on May 4. Consequently, the Motion Picture Association organized a meeting with major studio leaders to strategize on how best to navigate the proposed film tariff.