Trump’s tariffs set to hit American consumers as companies raise price
3 Min Read
US consumers are about to face steeper prices as major companies warn of inflation driven by Trump's tariffs and shrinking inventories.
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Customers shop at a retail store in Vernon Hills, Illinois, Monday, June 12, 2023. (AP)
US President Donald Trump’s tariff policies are beginning to take their toll, as companies prepare to shift the additional costs onto American consumers.
Throughout the spring, major retailers and manufacturers warned that new tariffs on imported goods would squeeze profit margins. Businesses now face a stark choice: absorb the costs or raise prices. On Tuesday, consumer goods giant Procter & Gamble signaled that price hikes on a range of US products would begin as early as next week, citing a grim forecast for 2025.
The mounting challenge for businesses is expected to translate into higher prices for everyday necessities. Procter & Gamble plans to increase prices on roughly 25% of its US product portfolio to offset tariff-related costs. According to a company spokesperson, these hikes will fall in the mid-single-digit percentage range across various categories.
Wider context
While the broader stock market has surged this year, driven largely by gains in the tech sector, consumer goods manufacturers have come under increasing pressure. Since the announcement of new tariffs on April 2, these companies have experienced a notable slowdown, reflecting growing investor unease about the financial strain from rising costs and slowing consumer demand.
The food and beverage sector, in particular, continues to struggle with sluggish sales post-pandemic, as consumers grow more resistant to higher prices for branded packaged goods. Nestle recently acknowledged that shoppers in North America remain cautious, often balking at price increases at the checkout.
Further price hikes risk deepening investor concerns about how major brands will navigate the dual pressures of cost-conscious consumers and escalating expenses driven by Trump’s ongoing trade war.
“You’re going to see companies like Walmart, Amazon, and Best Buy forced to pass price increases to consumers,” said Bill George, former chairman and CEO of Medtronic and a fellow at Harvard Business School. “Main Street has yet to see the fallout from increased tariffs, and they’re going to go higher.”
The true cost of the trade war
Between July 16 and 25, companies tracked in a Reuters global tariff survey estimated combined losses for the year ranging between $7.1 billion and $8.3 billion. Automakers have already absorbed billions in additional costs, and the pressure continues to mount.
Some companies stockpiled goods and raw materials ahead of the tariff implementation, allowing them to delay the impact on consumers. However, economists warn that inflationary effects will likely surface once those inventories are depleted, likely in the fourth quarter of this year or early 2026.
A number of firms have already moved to raise prices. For example, Swiss watchmaker Swatch implemented a 5% price increase following the April tariff announcement. CEO Nick Hayek told Reuters that the luxury segment remained largely unaffected by the hike, noting that high-end watch buyers often shop abroad where taxes are lower.
“You cannot do this with cars. You cannot do this with machines. But you can do this with watches. So it’s not so problematic for us,” Hayek explained.
Still, for most consumer goods and essentials, there are few such workarounds. As tariffs deepen and inventories shrink, millions of Americans may soon feel the true cost of the trade war at the checkout counter.
