US trade policy has created tremendous recessive pressure on exporters’ confidence, with more than half of responding companies already readying themselves for price increases. In fact, after Donald Trump announced these new tariffs on April 2, 54% of US companies surveyed by Allianz said they have no choice but to increase prices. In doing so, they seek to refund the increased costs associated with these tariffs. This change underscores a dangerous development – increasing anti-business attitudes. Firms are still trying to sort out the ramifications of the administration’s trade policies.
Prior to the tariff announcement, less than 5% of exporting firms expected a drop in turnover. Well, that’s an understatement – the times have turned upside down. Currently, 42% of firms predict a drop in their turnover of between 2% and 10% over the next year. This unpredictability has put a major dent in exporters’ confidence, leading them to rethink their pricing models.
The proposed tariffs start with a 10% universal levy on every single US import, along with a 30% tariff targeted specifically on Chinese imports. Not only were the additional tariffs applied more narrowly to specific industries such as metals and auto parts. This expansion of trade barriers has many companies very understandably on edge. Doug McMillon, CEO of Walmart, confirmed that the retail giant plans to raise prices in response to the tariff situation.
IHS Markit data reveals a jump in inflation concerns in consumer sentiment measures. The University of Michigan’s Institute for Social Research business expectations have reached their highest levels since 1981. Almost eight-in-ten affected American companies scrambled to frontload their shipments to China before the tariffs hit. In fact, of them, a quarter did so thinking ahead to the November 2024 election.
For all the challenges, just 22% of firms surveyed feel they can absorb the heightened costs borne from tariffs. Of those likely to be affected, a clear majority — 60% — anticipate that these tariffs will hurt their business operations.
Ynon Kreiz, CEO of Mattel, noted the importance of efficiency and productivity amid rising costs.
“Where [it] can be more efficient and more productive.” – Ynon Kreiz
For companies, it’s a challenging time to navigate. How well they can respond to a rapidly evolving economic situation will determine their ability to weather the storm and thrive in the months ahead. The ramifications of Trump’s tariffs extend beyond immediate price increases, potentially reshaping consumer behavior and business strategies across various sectors.