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Tariffs Weigh on Corporate Profits, Hinting at Higher Prices for Consumers

Strategic Insights

— 2 min read

As the Trump administration's tariff policies continue to disrupt global trade, American companies are being forced to absorb the costs. With the Treasury Department taking in about $30 billion a month in customs duties, corporations are looking for ways to pass the burden on to consumers. While inflation data has shown limited effects so far, corporate earnings calls suggest that the tide is turning. Companies are starting to pass on 37 percent of new tariffs to consumers, forcing 9 percent onto suppliers, and absorbing 51 percent through August. This is a significant hit to shoppers' wallets, enough to reverse inflation's fall. However, it's a milder hit than if companies were charging as much to consumers as they had at the same point in the last burst of tariffs during President Trump's first term.

Key Takeaways:

  • Companies have passed on 37 percent of new tariffs to consumers, forcing 9 percent onto suppliers, and absorbing 51 percent through August, according to Goldman Sachs.
  • This is a significant hit to shoppers' wallets, enough to reverse inflation's fall, but milder than the previous period of tariffs.
  • Automakers like General Motors have raised prices by less than 1 percent, demonstrating their reluctance to ask car buyers to pay more.
  • Companies are trying to offset tariff costs through concessions from suppliers, cost savings across their supply chains, and increased prices.
  • The oil industry contractor Halliburton forecast $60 million in tariff costs for the fourth quarter, while the toymaker Mattel estimated its tariff costs at $100 million.
  • Companies like Autoliv, which supplies parts to carmakers, have recovered about 75 percent of their tariff costs and expect to make up for all of them by the end of the year.

Statistics:

  • The Treasury Department has taken in about $30 billion a month in customs duties since tariff policies were implemented.
  • Companies have passed on about 37 percent of new tariffs to consumers, forced 9 percent onto suppliers, and absorbed 51 percent through August, according to Goldman Sachs.
  • General Motors has raised prices by less than 1 percent, reflecting the automaker's reluctance to ask car buyers to pay more.
  • The steel maker Cleveland-Cliffs has seen a significant rebound in domestic steel demand, with orders from automakers jumping after aluminum and steel tariffs took effect in March.
  • The industry anticipates paying between $3.5 billion and $4.5 billion in tariffs this year, with some companies hoping for tariff relief.

Sources:

  • Goldman Sachs
  • General Motors
  • Halliburton
  • Mattel
  • Autoliv
  • BNP Paribas
  • Cleveland-Cliffs
  • Paccar
  • Flexsteel
  • Fifth Third Bank
  • Bank of America
  • The New York Times
  • Taylor Glascock for The New York Times
  • Brett Carlsen for The New York Times
  • Scott McIntyre for The New York Times

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