The latest report indicates that many U.S. businesses believe they need to raise prices due to Donald Trump’s tariffs. A survey conducted by Allianz, involving over 4,500 companies from nine countries, revealed that 54% of U.S. companies feel compelled to increase prices to cover tariff-related costs. Strikingly, only 22% of those surveyed felt they could absorb the added expenses without consequences.
The uncertainty surrounding U.S. trade policies is also damaging exporters’ confidence. The survey noted that when Trump initially announced his tariffs, sales were expected to drop by anywhere from 2% to 10% over the coming year, a stark contrast to the projection of under 5% before April 2nd, referred to as the “liberation date.”
While Trump has rolled back some of the proposed taxes, significant tariffs remain in place. These include a broad 10% tariff on all imports, a hefty 30% on goods from China, as well as additional duties targeting specific sectors like metal and auto parts.
Trump maintains that these tariffs will significantly boost America’s wealth, yet the reality seems to point towards increasing costs for businesses and consumers. According to the University of Michigan Institute of Social Studies, consumer inflation expectations soared to their highest levels since 1981 in April.
In an effort to avoid raising prices too quickly, many companies have been stockpiling inventory with the hope of bypassing the immediate impact of the tariffs. Eight out of ten American firms reported prioritizing shipments to China ahead of the tariff announcements, with a quarter of them launching initiatives before the November 2024 elections.
Recent inflation data from April showed that price rises in the U.S. remained consistent with the previous month. Economists believe it might take a while for the effects of tariff-induced price hikes to really show up in the data, and businesses are starting to acknowledge a need to pass on some costs to consumers.
“Considering the weight of the tariffs, even those announced recently, it’s clear we can’t shoulder all the pressure,” stated Walmart’s CEO Doug McMillon on a recent revenue call. “The higher the tariff, the higher the price.” Similarly, Mattel, the toy manufacturer, indicated it would also need to increase prices while continuing to produce a portion of its goods overseas, as its CEO Ynon Kreiz mentioned in a discussion with CNBC earlier this month.
The findings suggest that 60% of the companies surveyed anticipate tariffs will negatively affect their operations, with the outlook for robust export growth this year shrinking to 60%, down from 80% at the year’s start. Many firms find themselves poised to increase prices while relying on their stockpiled goods, hoping for favorable trade agreements soon. However, if the trade war drags on, it looks like prices will have to rise by summer.
“Ongoing business research indicates that businesses will, by summer, end up absorbing most of the tariff increases,” pointed out Maxine Darmet, a senior economist at Allianz Trade.
