On February 2, North American companies have moved beyond the "wait and see" phase regarding tariffs. President Donald Trump imposed a 25% tariff on goods from Canada and Mexico, and a 10% tariff on China, potentially escalating into a full-blown trade war. This development is expected to pose new challenges for executives grappling with increased costs.
The impact of tariffs on goods from the U.S.'s top three trade partners could disrupt various industries ranging from automobiles to consumer goods to energy. In the past, executives managed to evade discussing this issue but are now compelled to address it. As Jeffrey Sonnenfeld from Yale School of Management aptly puts it, CEOs are puzzled by the tariff actions taken against allies rather than adversaries.
Many renowned global companies such as Amazon, Ford Motor, Mondelez International, and Owens-Illinois are anticipated to face inquiries regarding their strategies to counter these additional costs in their upcoming financial reports. Despite several attempts to seek comments from companies, none were willing to speak on record about the tariffs.
Nevertheless, some industry associations, including the U.S. Steelworkers union, criticized the tariffs for their potential impact on industries in both Canada and the U.S. Notably, companies like General Motors and Toyota are contemplating relocating production to the U.S., while Alcoa is considering changing shipment routes to alleviate the tariff repercussions.
While larger companies may navigate through tariff challenges by shifting operations or altering supply chains, smaller companies without global reach face more significant hurdles. The consumer price impact of tariffs remains uncertain, with businesses possibly absorbing some or all of the tax burden.
The Consumer Brands Association supports a trade policy favoring American jobs but acknowledges that tariffs could lead to price hikes. Retailers like Walmart and Target, aiming to maintain competitive prices, may struggle with increased supply chain costs during these tariff uncertainties.
Church & Dwight is focusing on local manufacturing and efficiency enhancements to mitigate tariff effects. CFO Rick Dierker emphasizes their readiness to adapt to changing circumstances amidst the ongoing volatility.