The Impact of US Tariffs on Consumers: Analyzing Corporate Decisions

With the implementation of tariff policies by former US President Donald Trump, companies have begun announcing their strategies for dealing with these policies, which include passing the additional costs onto the American consumer.

Major Companies Warn of Price Increases

Throughout the spring, major retailers and consumer goods manufacturers warned that tariffs on imported goods would impact their profit margins, forcing them to choose between reducing profits or raising prices for consumers. Companies like Procter & Gamble chose a strategy that combines both.

Procter & Gamble Announces Price Increases

Procter & Gamble, the producer of well-known brands such as Pampers and Tide, announced pessimistic expectations for 2025 and indicated that it would raise prices for some products in the US market starting next week. This move comes as a response to the new tariffs.

Potential Impact on Consumers

Consumers are expected to feel the impact of these challenges in the coming months. Procter & Gamble stated that it would raise prices on about a quarter of its products in the US market to help offset the costs resulting from the new tariffs. The company indicates that the increases will be in the mid-single-digit range.

Performance of Major Companies in the Stock Market

Despite the rise of US stock indices thanks to large investments in the technology sector, many major consumer companies are facing difficulties. Since Trump's announcement of tariffs on April 2, shares of Procter & Gamble have fallen by 19%, Nestle by 20%, Kimberly-Clark by 11%, and PepsiCo by 7%, while the Standard & Poor's 500 index has risen by more than 13%.

Additional Challenges Facing Companies

Consumer goods, food, and beverage companies have faced sales challenges since the start of the pandemic, as consumers are hesitant to buy expensive well-known brands. Nestle stated last week that consumers in North America remain cautious about rising prices.

Investor Concerns

Raising prices by companies raises investor concerns about how major brands will deal with the dual challenge of thrifty consumers and high costs resulting from the trade war.

Passing Costs to the End Consumer

Experts expect companies like Walmart, Amazon, and Best Buy to pass the price increases on to consumers. They add that the general public has not yet felt the full consequences of the tariffs and that these tariffs will continue to rise.

Estimates of Losses for Companies

In the period from July 16 to 25, companies covered by the Reuters Global Tariff Tracker reported that they expect total losses ranging from $7.1 billion to $8.3 billion for the entire year.

Impact of Tariffs on the Automotive Sector

Automakers such as General Motors and Ford have already incurred billions of dollars in tariff costs.

Delaying Price Increases

Many companies shipped more goods and raw materials to the United States before the tariffs took effect. Economists and analysts believe that this stockpiling helped some companies delay raising prices until later this year, which explains why tariffs have not yet been reflected in US inflation data.

Expectations of Increased Inflation

The Deputy Secretary-General of the International Chamber of Commerce, Andrew Wilson, estimates that inflationary pressures will emerge once corporate inventories are depleted, but this may not happen until the fourth quarter or the first quarter of next year.

Other Companies Have Started Raising Prices

Other companies, such as EssilorLuxottica, the manufacturer of Ray-Ban glasses, have started raising prices. The CEO of the Swiss watch and jewelry manufacturer Swatch, Nick Hayek, recently told Reuters that the company raised its product prices by about 5% after Trump announced the tariffs in April, but he noted that this had "zero impact on sales."

Limited Impact on Luxury Products

He pointed out that luxury brands like Tissot are less sensitive to price increases. Consumers who want to buy expensive watches may choose to travel to countries with lower taxes to buy them.

Conclusion

In the end, companies face significant challenges in dealing with tariffs, and their strategies will inevitably affect consumers. It is essential to monitor how the market responds to these changes and how companies and consumers will adapt to the new situation.