Corporate America Pays the Price as Trump's Tariffs Hit $55 Billion

The US has collected an additional $55 billion in tariffs this year, with corporate America largely shouldering the bill. President Trump's new levies have pushed the country's tariffs to their highest levels in decades. The tariffs are typically paid by importers when goods reach US ports.

The U.S. has collected an additional $55 billion in tariffs this year, with corporate America largely bearing the brunt. President Trump's new levies have pushed the country's tariffs to their highest levels in decades. The tariffs are typically paid by importers when goods reach U.S. ports [1].

The tariffs have been particularly harsh for companies like General Motors, Hasbro, and Nike, which have seen significant impacts on their profits. General Motors has paid out $1 billion, Jeep maker Stellantis $350 million, and toy maker Hasbro $60 million [1]. Firms are cautious about raising prices for fear of losing market share, but consumers are paying more for toys, furniture, clothing, and tropical products like bananas and flowers [1].

Some foreign suppliers are absorbing part of the tariffs by offering discounts to their American buyers. Chinese exporters may be absorbing as much as 20 percent of the tariff, while suppliers from other countries are taking a smaller hit [1]. However, the majority of the cost is currently being borne by corporate profits.

The situation is set to change with Japan and the European Union nearing trade deals. These deals could lead to a mass price increase as companies pass on the costs to consumers. The Import Price Index, which measures prices when imports arrive at the border, has shown mixed signals. While there is some discounting in certain categories, it suggests that U.S. importers and ultimately consumers are absorbing more of the cost [2].

The economic impact of tariffs is a complex issue. While businesses have absorbed most of the initial shock, the majority of the inflationary impact has not yet been realized. The majority of businesses will not make long-term production decisions until they see where tariffs settle in [3].

In the long run, the U.S. strategy of using tariffs to pay down the deficit is not working. The critical issues of debt, deficit, and interest costs are nearing a breaking point. Adding the cost of tariffs to corporate America weakens, not strengthens, the U.S. economy [4].

The trade deals with Japan, Indonesia, and the Philippines have been criticized as one-sided. Japan has agreed to a 15 percent tariff on its exports while dropping its own tariff on U.S. cars, trucks, rice, and agricultural goods. Indonesia and the Philippines got even worse, with a 19 percent U.S. tariff with little in return [5]. The European Union is likely next in line, facing a 15 percent tariff on most exports to the United States.

The loonie has risen 5.5 percent against the U.S. dollar, making Canadian goods more expensive in the U.S. market and U.S. goods cheaper in Canada. Falling commodity prices, especially for oil, have also hit Canada hard. The average price of Canada's commodity exports has fallen seven percent this past year [5].

The prognosis for 2025 and 2026 is bleak, with the World Bank group's latest forecast indicating a decline in commodity prices. The U.S. economy is facing significant challenges, and the long-term impact of Trump's tariffs remains uncertain.

References:

[1] https://www.linkedin.com/news/story/corporations-eat-tariffs-for-now-7501954/
[2] https://lnkd.in/eN24ZzsK
[3] https://lnkd.in/g_q7iC74
[4] https://lnkd.in/gvXQnnjH
[5] https://lnkd.in/g_q7iC74