Trade War Uncertainty Forces Price Hikes, Profit Cuts

As the trade war initiated by U.S. President Donald Trump escalates, businesses across various sectors are grappling with increased costs, disrupted supply chains, and growing economic uncertainties. The first quarter of the year saw numerous companies reporting significant challenges due to the fluctuating trade policies of the Trump administration.

Major corporations in the packaged food, beverage, and consumer goods industries have expressed concerns about the impact of Trump's tariff policies and his criticism of Federal Reserve Chairman Jerome Powell. These factors are eroding confidence in the U.S. business community.

Procter & Gamble, a leading manufacturer of diapers, announced plans to raise prices to offset the additional costs incurred due to the trade war. The company's Chief Financial Officer, Andre Schulten, stated that all available measures would be employed to mitigate the impact of tariffs on their cost structure and profitability.

Nestle's CEO, Laurent Freche, and Unilever, the maker of Dove soap, also noted a decline in consumer confidence in the U.S. The market's response to these developments was subdued, with stock prices and the dollar's rebound losing momentum as investors tried to make sense of the rapidly changing statements from the Trump administration regarding tariffs and the Federal Reserve.

While most tariffs have been suspended until July 8, a 10% general tariff and specific tariffs on aluminum, steel, and automobile imports remain in place. As the first-quarter earnings season progresses, companies are calculating the costs of this turmoil and outlining strategies to mitigate its negative effects.

Procter & Gamble, PepsiCo, and medical device manufacturer Stryker are among the latest companies to lower their annual profit forecasts due to trade disruptions. American Airlines has also withdrawn its financial projections for 2025, aligning with its peers.

Stryker has warned about the potential impact of proposed cuts to academic research funding by the Trump administration. Procter & Gamble's Schulten emphasized that adjusting prices and reducing costs are the primary strategies to navigate this storm, as changing procurement strategies from China is challenging in the short term due to a lack of alternatives.

Hyundai Motor Company has established a special task force to address tariff issues and has shifted production of some Tucson SUVs from Mexico to the U.S. The automaker anticipates a challenging business environment due to the intensifying trade war and other unpredictable macroeconomic factors.

Hyundai and its subsidiary Kia Motors, together the third-largest automotive group globally, derive about one-third of their sales from the U.S. market, with imported cars accounting for two-thirds of their U.S. sales.

Consumer confidence is waning, as evidenced by Germany's government lowering its economic growth forecast for 2025. The uncertainty from global trade disputes is hindering economic growth and suppressing investment.

Swedish hygiene products manufacturer Essity reported a decline in demand for its products in North American hotels and restaurants, likely due to reduced dining out and travel. This aligns with Chipotle's warning that economic uncertainty is causing Americans to spend less on dining out, leading the chain to lower its sales forecast.

Nokia, a telecommunications equipment manufacturer, noted that U.S. tariffs will cause short-term disruptions. Dassault Systèmes, which sells software to automakers, aerospace companies, and defense contractors, has lowered its expected profit margins due to market volatility caused by tariffs.

Nestle and Unilever reported better-than-expected quarterly sales but are slowing down price increases in the U.S. to avoid consumers switching to lower-priced store-brand products. This may alleviate concerns about tariffs leading to significant inflation and economic slowdown. However, companies like Luxottica, LG Electronics, and Interparfums have indicated they are raising or may raise prices in the U.S.

PepsiCo's Chairman and CEO Ramon Laguarta stated that the company expects more market volatility and uncertainty, particularly related to global trade, which will increase supply chain costs. He also noted that consumer conditions in many markets remain weak, adding to the uncertainty.