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Trumps says levies will bring jobs back to the US, but company executives focus on raising prices or cutting back investment activity
Published : 03 Apr 2025, 06:17 PM
Businesses around the globe on Thursday faced up to a future of higher prices, trade turmoil and reduced access to the world's largest market after US President Donald Trump confirmed their worst fears by instituting broad tariffs worldwide.
Trump ramped up his trade war with tariff rates from 10 percent to nearly 50 percent. He says the levies will bring jobs back to the United States - but company executives were focused on possibly raising prices, reducing shipments, or cutting back investment activity outright.
"The reality is stark: these tariffs will push prices higher on thousands of everyday goods - from phones to food - and that will fuel inflation at a time when it is already uncomfortably persistent," said Nigel Green, CEO of global financial advisory deVere Group.
Shipping companies, one of the main conduits of global trade, were among the first to sound the alarm on Thursday while many other business leaders kept a low profile as they pondered the new reality.
"The tariff plan announced by the US administration was significant, and in its current form, it clearly isn't good news for (the) global economy, stability and trade," Maersk, the world's second-largest container shipping firm, said.
"It is still too early to say with any confidence how this will ultimately unfold," the Danish company added.
German container shipping firm Hapag-Lloyd also said that tariffs could affect demand, cargo flows and costs. The world's fifth biggest container liner said it could be forced to adjust its service network in response.
Those fears were echoed by Dirk Jandura, president of Germany's BGA association, representing importers and exporters.
"We will have to translate the tariffs into price increases, and in many cases that means a drop in sales," he said.
ASIAN PRODUCERS HIT
Trump sees tariffs as a way of protecting the US economy from unfair global competition and a bargaining chip for better terms of trade.
The most common method of dealing with tariffs is to raise prices, passing along the cost to customers as far as possible. Other companies may try to diversify supply chains, but Trump's additional 34 percent tariff on China was accompanied by 46 percent and 49 percent tariffs on Vietnam and Cambodia, respectively - all Asian countries where companies had been shifting output.
Shares in Western sportswear brands Nike, Adidas and Puma all dropped sharply on Thursday as Vietnam, Indonesia, and China are leading markets for them to source products.
Shares in Apple fell 7 percent in Frankfurt, reflecting concerns over the iPhone maker's big manufacturing base in China.
In the US, retailers Target and Best Buy have said they will have to raise prices, but their margins are more likely to be squeezed, and Target and Walmart have been trying to negotiate with Chinese suppliers already dealing with a slowed economy.
US drinkers will pay more for cocktails, champagne and foreign beers, brands will disappear from bar menus and jobs will be lost on both sides of the Atlantic, drinks industry bodies said.
Some European companies that primarily serve higher-income consumers were planning to raise prices even before confirmation of the 20 percent tariffs on European Union imports.
Italy's Illy Caffe and Ferrari have both said they will lift prices, calculating premium coffee drinkers and sports car buyers will be able to absorb the extra cost.
Lavazza, another Italian coffee maker, said it could accelerate plans to expand its plant in the US, but the company must first assess the impact of potential tariffs on green beans from Brazil.
Giovanna Ceolini, head of Confindustria Accessori Moda, which represents Italian companies in the footwear, leather, fur and tannery industry, said that US tariffs come when companies are already struggling with increased costs.
"We are afraid that for our companies there will be a slowdown (in demand). It will depend on whether Americans are willing to pay a little more (for our goods)," she said.
Jefferies analysts anticipate a 6 percent increase in US luxury prices as companies seek to protect margins.
INVESTMENT CALL
The White House says tariffs will encourage more onshoring, similar to the revamped USMCA trade deal Trump signed during his first term that encouraged manufacturing activity to shift from China to Mexico or Canada.
German fan and motor maker ebm-papst, for example, is deliberating whether to build a third production plant or expand its existing site in Tennessee.
CEO Klaus Geissdoerfer said he had initially thought of a new plant in Mexico, but "some are saying, 'maybe it's better to go to the USA after all because we'll have to pay customs duty in Mexico'."
The most severe risk, according to executives interviewed by Reuters, is that businesses simply stop investing.
