Businesses Prepare for Trump’s Tariff Plans 👉 Updatem News

Some large companies have adopted a wait-and-see approach, others are accelerating imports.

Businesses large and small are preparing to make their final decisions as they position themselves for President-elect Donald Trump’s proposed tariff plans.

Trump and his transition team have not made official trade policy announcements. For now, companies have what the Republican president-elect outlined on the 2024 campaign trail: a 10-20 percent across-the-board tariff on all goods entering the United States and a 60-100 percent levy on all Chinese imports.

“We’re going to have 10 to 20 percent tariffs on foreign countries that have been ripping us off for years,” Trump said at a campaign event in August. “We’re going to charge them 10 to 20 percent to come in and take advantage of our country because that’s what they’ve been doing for nothing, to take our jobs.”

Large companies and smaller outfits have weighed in on Trump’s blueprint: to onshore more business to invest in American jobs, tariff free. According to LSEG data, executives from approximately 200 companies in the S&P 1500 Composite Index have discussed tariffs in earnings calls and investor conferences since September.

Higher prices have been common concerns coming from business executives.

Lowe’s CFO Brandon Sink stated during the company’s third-quarter earnings call that tariffs “certainly would add to product costs.”

“Roughly 40 percent of our cost of goods sold are sourced outside of the U.S., and that includes both direct imports and national brands through our vendor partners,” Sink said.

Toolmaker Stanley Black and Decker told investors and analysts that the company is preparing for possible economic policy changes, particularly on tariffs. While it aims to ensure its products remain affordable for customers, Don Allen, the president and CEO, acknowledged during the third-quarter earnings call that there would be price hikes.

Walmart CFO John David Rainey thinks prices will increase for its shoppers, though most of the goods the company sells are manufactured, assembled, or grown in the United States.

“We never want to raise prices,” Rainey said in an interview with CNBC on Nov. 19. “Our model is everyday low prices. But there probably will be cases where prices will go up for consumers.”

One strategy to mitigate potential side effects from tariffs has been accelerating imports before the new year.

Xeneta, a Norwegian ocean and freight rate data platform, said that businesses are bolstering imports to avoid higher tariffs comparable to what occurred in 2018.

“The knee-jerk reaction from U.S. shippers will be to frontload imports before Trump is able to impose his new tariffs,” the group said in a report. “If you have warehouse space and the goods to ship, frontloading imports is the simplest way to manage this risk in the short term.”

Other well-known brands are either beginning to adapt or adopting a wait-and-see approach.

Steve Madden, a $3 billion shoe company, confirmed shortly after the presidential election that it would reduce imports from China by as much as 45 percent over the next year.

Ralph Lauren assured investors and analysts that it was not too concerned about tariffs because its global sourcing and supply chain was already diversified. Manufacturer Yeti recently noted that many things regarding tariff policies in Trump’s second term are still up in the air.

For smaller companies, Trump’s potential expansion of tariffs could help level the playing field.

Rocco Malanga, the owner of Cedar Grove Christmas Trees and founder of the Association of Real Christmas Tree Merchants, believes trade levies would redirect demand to domestic growers and support local businesses and farms.

This aerial photo shows cargo containers stacked at a port in Lianyungang in China's eastern Jiangsu province on May 9, 2022. (AFP via Getty Images) — This aerial photo shows cargo containers stacked at a port in Lianyungang in China’s eastern Jiangsu province on May 9, 2022. AFP via Getty Images

“This shift would bolster the U.S. economy, strengthen local supply chains, and ultimately benefit American families through better pricing and higher-quality trees grown closer to home,” Malanga told The Epoch Times.

But while the fear among businesses and economic observers is that tariffs will result in higher prices, some say that this top worry was not realized during Trump’s first term.

Ravin Gandhi, the former CEO of GMM Nonstick Coatings, one of the world’s largest suppliers of nonstick coatings, says he would appear on CNBC in 2018 and warn that Trump’s tariffs would ignite a trade war and crash the economy.

“Obviously, I was wrong, because they didn’t, and then [President Joe] Biden kept a lot of the tariffs in place,” Gandhi said in an interview with The Epoch Times.

Instead, he observes a growing number of firms in his industry, which is heavily outsourced, considering returning to the United States.

Ultimately, Gandhi noted, he is optimistic about the next few years.

“I’m seeing a tremendous amount of animal spirits out there with the deregulation and all of the pro-business talk that’s happening,” he said. “I think that whatever downsides we may see from an inflationary perspective are going to be more than counterbalanced with just an animal spirit to desire to invest.”

Onshoring and reshoring have been ballooning trends since the coronavirus pandemic. Mary Lovely, a senior fellow at the Peterson Institute for International Economics (PIIE), believes the next development might be a U.S.-only supply chain.

“If the U.S. says, ‘No Chinese content, no matter what the good, what the product, whether there’s a national security implication or not,’ you’re going to see that supply chains will be created at higher expense just to serve the United States,” Lovely said during a recent Port of Los Angeles press briefing.

Looking ahead, economists at RSM say retailers could begin to renegotiate contracts, invest in operational efficiency, pull forward purchases, and better prepare for supply chain disruptions.

“Unless the higher costs created by tariffs can be passed on to the customers, consumer products companies will need to mitigate these changes or see their margins decrease,” they concluded in a note.

What the Experts Say

Various economists and think tanks have warned that the president-elect’s plans will revive consumer price pressures on a broad range of products and weigh on economic growth and employment levels.

Oxford Economics, for example, forecasts that higher tariffs would weaken consumer spending “due to a greater inflationary shock and a reduction in real household incomes.”

“In conclusion, while the Trump tax cuts are expected to provide a boost to consumer spending, the potential impact of higher tariffs remains a key concern,” said Alex Mackle, a corporate advisory engagement lead, in a recent note. “Understanding the balance between tax cuts and tariffs will be crucial in determining the overall effect on the U.S. consumer.”

Trump’s inner circle of billionaire businessmen and Wall Street financiers, from incoming Commerce Secretary Howard Lutnick to nominated Treasury Secretary Scott Bessent, have differed from the many assessments projecting high price inflation and slower growth.

Bessent, Lutnick, and other incoming administration officials have touted the trade tactic’s efficacy, describing it as a negotiating tool, revenue generator, and measure to protect American companies and jobs from unfair foreign competition.

Investor Scott Bessent speaks on the economy in Asheville, N.C., on Aug. 14, 2024. (Matt Kelley/AP Photo) — Investor Scott Bessent speaks on the economy in Asheville, N.C., on Aug. 14, 2024. Matt Kelley/AP Photo

Nazak Nikakhtar, an attorney specializing in international trade and national security, suggested that Trump could impose tariffs of 60 percent or more on Chinese goods starting on day one.

“We have so much flexibility and legal authority, and some of these statutes are so broad that they can absolutely be used to impose 60 percent tariffs on China and even higher,” Nikakhtar told The Epoch Times.

Nikakhtar previously served as Under Secretary and Assistant Secretary at the U.S. Department of Commerce during Trump’s first administration, where she played a key role in shaping the administration’s China trade strategy.

“The Chinese predatory economic practices have distorted the global markets for semiconductors, electronics, autos, critical minerals, the list goes on,” she said.

The trade distortions are so severe that new companies struggle to get into the market, while existing players are quickly losing market share, she said.

In an October interview with NTD TV, economist Peter Morici expressed a similar view, stating that “a 60 percent tariff on Chinese goods would not distort trade, but rather would recalibrate it to where might be if we had free markets.”

Morici, the former director of the Office of Economics at the U.S. International Trade Commission, added that China is engaging in a form of mercantilism, exploiting others for its own benefit.

“It sees the world in zero-sum terms.”

Both Nikakhtar and Morici argue that the impact of tariffs on inflation would be minimal, similar to the first term of Trump’s presidency.

Christopher Tang, an economist and distinguished professor at UCLA, says he has doubts about Trump’s proposed universal tariff “because it would really have a bigger impact on the U.S. economy.” However, he believes Trump will continue introducing more tariffs on Chinese imports to boost domestic payrolls.

Tang notes that U.S. companies have already begun diversifying their supply chains away from China to avoid tariffs and shifting their base to Southeast Asia to try to reduce tariffs.

Additionally, the advantages of outsourcing to China have diminished, says Gandhi.

He managed two plants in China and shut them down because they were too expensive, effectively outsourcing from China to India in 2014.

“A lot of people had no idea how much inflation had occurred in China and how we had employees in my Chinese operations who were making six-figure U.S. dollar salaries,” Gandhi said.

“So, China is not the low-cost provider anymore.”

Original News Source Link – Epoch Times

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