Now that the United States has instituted broad tariffs worldwide, companies will be forced to adapt, but the options to cope with taxes greater than expected are limited and unpleasant for companies and their customers.
President Donald Trump intensified on Wednesday his commercial war against the world with tariffs ranging between 10% and almost 50%, according to El País.
This measure, according to economists, would increase costs, threaten employment, stop growth and isolate the United States from a global trade system that promoted for decades.
Trump states that taxes will bring jobs back to the United States, but immediately after, executives focused on the possibility of raising prices, reducing shipments to the world’s largest economy or simply cutting the investment.
“This is how the world economic engine is sabotage while trying to boost it,” said Nigel Green, executive director of the Global Financial Advice firm Devere Group. “The reality is raw: these tariffs will raise the prices of thousands of everyday goods, from phones to food, and that will feed inflation at a time when it is already uncomfortably persistent.”
Trump sees tariffs as a way of protecting the domestic economy from unfair global competition and a currency to obtain better conditions for the United States.
The most common method to deal with tariffs is to raise prices, moving the cost to customers while they can support it. Other companies can try to diversify their supply chains, but the 34% reciprocal tariff imposed by Trump to China was accompanied by tariffs of 46% and 49% to Vietnam and Cambodia, respectively, all Asian countries where companies had been transferring their production.
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The effect could be to boost the price of retail goods, as evidenced after the announcement, when retail giants such as Walmart and Target both lost more than 6% in the operations after the opening of the market, while specialized names such as Lululemon fell more than 10%.
Target and Best Buy have warned that they will have to increase prices, but it is more likely that their margins will be reduced, and Target and Walmart have been trying to negotiate with Chinese suppliers who are already dealing with a decelerated economy.
“The first right now, and everyone is doing it, is to send letters to announce that we are going to increase prices,” said Bill Canady, executive director of Arrowhead Engineered Products, American manufacturer of spare parts, before the announcement of the tariffs.
He added that the company is also working with Asian suppliers to see if they assume part of the cost.
Some European companies that mainly serve high -income consumers have already planned to raise prices even before the 20% tariffs that the countries of the European Union will face. The Italian coffee maker Illycaffe and Ferrari both have said that prices will increase, something that wealthy buyers of sports cars can absorb more easily.
The White House affirms that tariffs will promote greater relocation, similar to the renewed TMEC commercial agreement that Trump signed during his first term, which promoted the transfer of China’s manufacturing activity to Mexico or Canada.
The German manufacturer of EBM-PST fans and engines, for example, is deciding whether to build a third production plant or expand its existing plant in Tennessee.
The executive director of the group, Klaus Geissdoerfer, commented that he had initially considered a new plant in Mexico, but “some say: ‘It may be better to go to the United States after all, because we will have to pay tariffs in Mexico.'”
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Even so, some importers could choose not to import products to the United States due to tariffs. The United States is an important importer of South Korea cars, Japan, Germany and other traditional allies, as well as high -value technological goods.
“The reciprocal tariffs will make it fiscally irresponsible for most importers to continue importing to the United States,” said Erik Rosica, sales supervisor of the OEC Group New York Load Logistics Company.
“These companies would have to have a considerable increase in costs to consumers to make this viable, something that, frankly, consumers may not be willing to pay,” he added.
The most serious risk, according to executives interviewed by Reuters, is that companies reduce their expenses due to uncertainty.
Several executives claimed to have spent the last months accelerating purchases to bring inventories to the United States from abroad. Automobile manufacturers, aerospace companies, retailers and large industrial companies increased imports – which triggered the commercial deficit of US goods to a record of 157,000 million dollars in January – before the imposition of tariffs. Now, they are more likely to postpone their expense plans.
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“They are going to close the scotters, they will not invest, they will not close any agreement and will assume expenses to try to anticipate the imminent economic crisis, whatever, or a possible recession,” said Bill George, former executive director of Medtronic and executive member of the Harvard Business School.
With Reuters information
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