The Wall Street Journal is reporting that corporate America is bearing the brunt of the new U.S. tariffs this year. The initial cost is mostly being paid by U.S. importers (manufacturers, retailers, or brokers), and not foreign producers or consumers. Companies are fearing loss of market share as well as the public ire of Pres.Trump should they raise prices:
It reports that:
U.S. firms like GM, Nike, and Hasbro are absorbing most of the tariff costs rather than passing them to consumers, fearing loss of market share. Some price hikes are expected later this year.
Inflation is ticking up mildly for tariffed goods like furniture, toys, and clothes. June CPI rose to 2.7% YoY (up from 2.4% in May), partly cushioned by inventory stockpiling and corporate absorption of costs.
Foreign suppliers, especially in China, have cut prices slightly (estimated 20% absorption), but not at the level Trump claimed would happen.
Major companies reporting tariff-related impacts:
GM: Paid $1B in Q2 tariffs; no broad price hikes yet.
Stellantis: Took a $350M profit hit.
Hasbro: $60M in expected full-year tariff cost; planning price hikes and cost-cutting.
Nike: Forecast $1B hit this fiscal year; price increases planned.
RTX (Raytheon): Tariffs hurt profits.
Walmart: Raised some prices (e.g., bananas from $0.50 to $0.54/lb); offsetting others via inventory cuts.
The report says that smaller businesses like florists are struggling more, having to both absorb and pass on cost increases. The overall burden from tariffs is estimated at 17% up from 2.3% last year.
How long can corporations continue to tighten the belts? Will the markets give earnings a break? Can they slip in small gains over time? Can time, give time to increase productivity/lower costs to absorb gains.
The dynamics point toward a potential delay in price increases, and may give the Fed the opportunity to cut rates if the price increases don’t materialize as expected, and other counter inflationary trends continue to improve.
This article was written by Greg Michalowski at investinglive.com.