North American companies brace themselves for fallout from Trump’s tariffs
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Automakers like Stellantis, which opened a factory in Ontario, are now facing higher costs.
PHOTO: AFP
WASHINGTON – For North American companies, the “wait and see” moment on tariffs is over.
US President Donald Trump imposed a 25 per cent levy
Tariffs on goods imported from the US’ three largest trade partners could upend industries, from autos to consumer goods to energy.
Executives have been able to deflect questions about dealing with tariffs before the Feb 1 announcement, and many wanted to avoid antagonising Mr Trump’s White House after he took office. That non-response may no longer be possible.
“All CEOs are bewildered by these non-strategic tariff tantrums being directed at our closest allies instead of adversaries,” said Professor Jeffrey Sonnenfeld, who teaches at the Yale School of Management in New Haven, Connecticut.
Numerous global companies will report results this coming week, including Amazon, Ford Motor, Mondelez International and Owens-Illinois. They will likely face a barrage of questions on how they plan to mitigate these costs.
Reuters reached out to numerous companies, none of whom would comment on the record about the tariffs. Several industry associations did comment, though some were more critical than others.
The US Steelworkers union – the largest industrial union in North America – criticised Mr Trump’s tariffs on Canada, citing some US$1.3 trillion (S$1.8 trillion) in trade between the two countries.
“These tariffs don’t just hurt Canada. They threaten the stability of industries on both sides of the border,” union president David McCall said in a statement.
Automakers such as General Motors and Toyota could shift production from foreign factories to the United States, while companies like global aluminium giant Alcoa have suggested rerouting shipments to reduce the tariff burden.
Many companies accelerated shipments in the fourth quarter ahead of Mr Trump’s return to office.
Offsetting tariffs are harder for smaller companies without global operations that need foreign parts.
Numerous aerospace and auto companies operate near the US-Canada border, while US refiners in the Midwest rely heavily on Canadian crude oil.
Tariffs are paid by importing companies, not foreign nations, as Mr Trump frequently claims erroneously.
This week, he acknowledged that tariffs would cause short-term disruption as the costs are sometimes passed on to consumers.
Mr Trump has pursued tariffs as a way of forcing companies to relocate to the US. But that is frustrating to firms that shifted production to Canada and Mexico in response to Mr Trump’s tariffs on China in his first term – and now are set to be hit, even after “near-shoring” closer to home.
Mr Matt Blunt, president of the American Automotive Policy Council, which represents Ford Motor, General Motors and Stellantis, said: “Our American automakers... should not have their competitiveness undermined by tariffs that will raise the cost of building vehicles in the US and stymie investment in the American workforce.”
Higher checkout prices
Research shows that higher tariffs usually lead to higher checkout prices, but the exact effect is unclear. Experts told Reuters that businesses might absorb some or all of the tax burden.
Mr Tom Madrecki, vice-president of supply chain resiliency at the Consumer Brands Association, in a statement said “the consumer packaged goods industry supports a strategic ‘America First Trade Policy’ that protects American jobs and keeps food, beverage, household and personal care products affordable”.
However, he also said tariffs could cause higher prices and urged Mexico and Canada to work with Mr Trump.
Big-box stores such as Walmart and Target, which have been fighting to keep prices low because of inflation, might not be able to withstand higher supply chain costs.
The two companies did not immediately respond to requests for comment, but the National Retail Federation (NRF), which represents the nation’s largest retailers, said the White House should explore other ways to achieve its policy goals.
Mr David French, NRF’s executive vice-president of government relations, said: “As long as these universal tariffs are in place, Americans will be forced to pay higher prices on everyday consumer goods.”
Church & Dwight, which makes Arm & Hammer detergent and Trojan condoms, said it would focus on local manufacturing and productivity improvements to offset the effects.
“These are volatile situations, so we’ll see how long it lasts and what happens,” chief financial officer Rick Dierker said in an earnings call on Jan 31, adding that it has the ability to “be reactive when we need to be”. REUTERS
