The implementation of the tariff policy by the Trump administration may have started to pinch pockets of consumers across the nation. Presently, a blanket 10% tariff has been imposed on imports from all foreign countries. This surge in tax on imported goods could potentially trigger a nationwide increase in pricing. Going a step further, President Donald Trump has proposed a ‘counterbalancing higher tariff’ on around 60 countries, which will be enforced after the 90-day negotiation period ending July. The wide-reaching effects of these tariffs span across multiple sectors such as retail, tech, auto and many more, as a lot of U.S firms have their manufacturing processes based outside of the United States. This article discusses possible implications of the tariffs on the average consumer and the rise in prices that can be anticipated.
As of April 5, all countries except China are subject to the tariffs. There lies a prolonged history of trade disputes between the U.S. and China, reaching a tentative settlement on May 12, reducing the ‘counterbalancing’ tariffs to an overall 30%. Still, the prior layers of tariffs set in place during the ongoing trade dispute inflate the prices of imported retail products. A further 50% tariff looms over the European Union as of May 23. This tariff policy is already being felt by several businesses as a surge in operational costs.
Companies such as Amazon and Home Depot have maintained that increased costs show no sign of affecting consumer spending to date and therefore, the businesses may not need to transfer these costs onto the consumer.
Target, on the other hand, showed decreased earnings in May and declared probable price elevations due to the new tariffs. While they aim to maintain existing prices, the cost of fresh products can be expected to escalate.
Walmart, too, forecasts potential price increases in connection with the tariffs by the end of May, with additional hikes set for June.
Sportswear giant Adidas anticipates a price surge in their products due to the higher tariffs. However, ongoing negotiations prevent the company from making a final decision on the extent of the price hike.
Procter & Gamble is being nudged towards increasing their prices even though the company has been making efforts to evade the impact of the tariffs.
Best Buy also foresees escalating costs because of the newly instated tariffs.
Mattel, the toy manufacturing giant, is contemplating the possibility of shifting its Chinese production facilities. As it stands, about 40% of the company’s total toy manufacturing takes place in China.
In the technology sector, there was a threat made in May of imposing a minimum of 25% import tax on tech companies that procure products from Asia. This proposed tariff would equally apply to similar technology firms.
The auto industry is not immune to the tariff policy. The U.S. imposed a 25% tariff on internationally manufactured cars, with an added 25% tariff on steel and aluminum. Furthermore, an additional 25% tax has been put on automotive parts. There is a clause that if international auto parts are used in U.S. assembly, there could be partial reimbursements of the taxes in two years. But, there is no clarity from automakers about whether the U.S. auto tariffs will seep into the consumers’ pockets.
Japanese automobile companies which include Toyota, Honda and Nissan could likely see a dip in their economic growth this year. Toyota, in particular, predicted significant losses due to the newly imposed auto tariffs.
Ford Motor, which carries out a significant part of its production domestically, might see less of an economic downturn. Yet, the imported vehicle components are most likely to be taxed at the heightened 25% rate.
In early May, General Motors revealed plans to offset at least 30% of the anticipated cost increase caused by tariffs.