- President Donald Trump’s import taxes are meant to help US manufacturers by making foreign products more expensive, but some companies say the costs are likely to trickle down to American consumers.
- Several companies have either already raised their prices or say they plan to as a result of the tariffs.
- On Friday, Trump threatened to impose tariffs on another $US267 billion worth of Chinese goods. Analysts say this is bad news for the retail sector.
President Donald Trump’s tariffs are leading to higher import costs for US-based companies, and it’s American consumers who are likely to bear the burden.
While the White House has pointed to national security issues as justification for the tariffs, there’s also a practical economic component to Trump’s duties. The tariffs on foreign imports such as washing machines, steel, and aluminium are designed to make foreign goods more expensive and therefore US manufacturers more appealing.
Since these tariffs have been in place, several US companies including Coca-Cola and Winnebago have said they have been forced to raise prices on the consumer’s side. Others are threatening to follow suit.
According to the Labour Department, the average cost of washing machines was up 17% in just the past three months, The Wall Street Journal reported.
On Friday, Trump threatened to hit China with tariffs on another $US267 billion worth of goods.
“The new tariffs are bad news for the retail sector, especially as the latest round seems to extend the tax to a vast array of consumer goods. Many retailers will now be faced with a difficult choice of whether to pass the cost increases across to consumers or to take a hit on their margins,” Neil Saunders, managing director of GlobalData Retail, wrote in a comment email to Business Insider.
“Fortunately, the consumer is currently in a position to cope with some mild rises in retail prices. However, a rise in prices across the board will likely result in a decline in retail volumes over the longer term, which will be unhelpful to the sector,” he added.
Here’s a list of some of the best-known brands that have spoken out about the new tariffs and either raised prices already or say they plan to:
Coca-Cola said on July 27 it would be raising the price of its sodas in the middle of the year.
“There is some broad-based push on input costs that have kind of come in and affected ours and many other industries as well,” CEO James Quincey told The Wall Street Journal.
Quincey cited steel and aluminium tariffs announced by Trump earlier this year as one of the causes of increased costs, but did not specify how high the price increase would be.
“We’ve had to go to the market a bit more frequently and a bit more aggressively with some price increases as of late,” Michael Happe, CEO of Winnebago Industries, toldThe Wall Street Journal in July.
Happe did not confirm how high the prices increases were.
The company has also made changes to the design of the RV to trim costs.
Scott Wine, CEO of Polaris, a company that makes motorcycles, quad bikes, and snowmobiles, said in a recent TV news conference after the release of its second-quarter earnings that the company had raised prices on some items impacted by tariffs, such as motorcycles.
“As we and others raise prices, it creates a real risk of inflation to our customers and the economy, which could be more harmful than the tariffs themselves,” Wine said, according to the Associated Press.
The company is looking to move production of motorcycles that it sells in Europe from Iowa to Poland to avoid being stung by EU tariffs on US products, The Wall Street Journal reported.
Whirpool washing machines
In a call with investors in July, Whirlpool CEO Marc Bitzer said that the rising cost of raw materials that has resulted from US tariffs on steel and aluminium was putting pressure on the company’s earnings.
The company said it is looking at price hikes to cover these costs but did not specify by how much.
In June, carmaker General Motors submitted a letter to the US Commerce Department urging the president to abandon the plan for auto tariffs, saying that they would lead to price increases of thousands of dollars, The Financial Times reported.
“At some point, this tariff impact will be felt by customers. Based on historical experience, if cost is passed on to the consumer via higher vehicle prices, demand for new vehicles could be impacted,” the letter said.
LG Electronics washing machines
In January, LG Electronics said it would raise the prices of washing machines by 4-8% in March, Reuters reported.
This works out to about $US50 more per machine, a spokesperson for the company told Reuters.
Gavin Hattersley, CEO of MillerCoors, the maker of Coors Lite and Miller Lite, told Bloomberg in June that it may have to look at raising prices on the consumer’s side.
“I can’t just go to the shareholders and say, ‘You’re just going to have to accept my profit’s going to be $US40 million less. It doesn’t work that way,” he said.
“It’s costing the American consumer. It’s absolutely not what the president intended, in my view, but it’s a consequence of what he did,” he added.
Samuel Adams — The Boston Beer Company
In a call with investors on July 26, the company said there could be more price increases in the second half of the year thanks to higher commodity costs.
“This is a very competitive industry and we want to maintain our competitiveness. But we are starting to see, on a local basis, price increases coming through at a time when they wouldn’t normally be reflected,” James Koch, chairman of the company, said on the call.
During a call with investors in May, CFO Anthony DiSilvestro said that US tariffs on steel and aluminium were likely to put pressure on the company’s margins, and it’s expecting them to be down in fiscal 2019.
“Obviously, the question is what is the impact of potential pricing to help to offset that,” he said, without giving more detail.
The Japanese company told Bloomberg in June that the 25% tariff “is just a tax on consumers,” adding that it would pass the additional costs on to the consumer, which would lead to an increase in the cost of all of its vehicles sold in the US.
As an example, the Toyota Camry would face $US1,800 in increased costs, a spokesperson for the company told Bloomberg.
During an earnings call in August, the CEO of Newell Brands – the company behind well-known names such as Crock-Pot, Rubbermaid, Yankee Candle, and Sharpie – said he expects tariffs to cost the company $US100 million.
“I think it’s too early to know exactly how much of the pricing will land but we’re not going to hesitate to take the price up,” CEO Michael Polk said.
Kleenex and Huggies
On August 15, Kimberly-Clark, the parent company of Huggies and Kleenex, announced it would be raising prices in the “mid-to-high single digits” on core products to offset rising commodity costs, specifically price increases in hardwood and softwood pulp, which are used to make diapers, tissues, and toilet paper.
In a recent earnings call, however, COO Michael Hsu alluded to US tariffs as another pressure contributing to price hikes.
“When you have a commodity impact as large and significant as it is right now, I think our customers understand that. And we do have to recover and improve our net revenue realisation. And so we are going to take the appropriate actions,” he said in July,CNBC reported.
Brown-Forman, the company behind Jack Daniel’s, Finlandia Vodka, and several other liquor and spirit labels will raise its prices by the end of the year, its CFO, Jane Morreau, told investors in August.
The alcoholic drinks maker is expecting tariffs to cut its full-year profits by 6%.
US whiskey and bourbon are some of the products which are facing import duties from the EU, China, Mexico and Canada in retaliation to US tariffs on steel and aluminium, according to Reuters.
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