Companies Go On Record About Future Tariff-Related Price Increases
Trump's core policies will drive inflation
People often complain that you cannot trust anonymously-sourced news content. However, business leaders are willingly going “on record” to talk about the impact of the trade tariffs Donald Trump has consistently promised to implement if he is elected President. Today’s Washington Post goes into detail about how they are already planning to raise prices if those wide-reaching consumption taxes tariffs are put in place. From the article:
Across the United States, companies that rely on foreign suppliers are preparing to raise prices in response to the massive import tariffs that former president Donald Trump promises if he wins the election Tuesday.
Producers of a range of items, including clothing, footwear, baby products, auto parts and hardware, say they will pass along the cost of the tariffs to their American customers.
The planned price increases next year would come as consumers are beginning to enjoy relief from the highest inflation in four decades and directly contradict Trump’s repeated assurances that foreigners will pay the tariff tab.
“We’re set to raise prices,” Timothy Boyle, chief executive of Columbia Sportswear, said in an interview. “We’re buying stuff today for delivery next fall. So we’re just going to deal with it and we’ll just raise the prices. … It’s going to be very, very difficult to keep products affordable for Americans.”
[…]
“A consistent theoretical and empirical finding in economics is that domestic consumers and domestic firms bear the burden of a tariff, not the foreign country,” according to an analysis by the nonpartisan Budget Lab at Yale University.
Executives at AutoZone, an auto parts retailer, told investors this month they were prepared for products they import to become more expensive. The company’s top suppliers include companies in India, China and Germany, according to a June press release.
“If we get tariffs, we will pass those tariff costs back to the consumer,” Philip Daniele, CEO of AutoZone, said on a recent earnings call. “We’ll generally raise prices ahead of — we know what the tariffs will be — we generally raise prices ahead of that.”
This should surprise no honest person who has been following this issue. Despite Trump’s constant lies, foreign governments do not and never have paid tariffs. Generally speaking, while the people importing the goods could, in theory, absorb those tariffs, that’s a tough pill to swallow in our “maximize shareholder value” era.
And Trump’s supporters are not denying this. The best counter most have is that perhaps he won’t follow through on a core campaign promise. That’s also the hope of some business leaders too. From the same Washington Post article:
By December, some of Acme United’s Westcott brand products, such as rulers and paper trimmers, will be made in Thailand and the Philippines, allowing them to escape tariffs aimed at China, CEO Walter Johnsen said on a recent earnings call.
The Shelton, Connecticut-based company, which operates under multiple brands, also has shifted production of some first aid and medical products to India, Egypt and its U.S. factories in Florida, North Carolina and Washington state.
Johnsen said he was skeptical that Trump would actually follow through with his announced plans to increase tariffs on all U.S. imports. Taxing imported medical products, including medicines, for example, would be too disruptive for the U.S. health-care system, he said.
“The hospitals would come to a halt. So it’s highly unlikely, in my view, that 60 percent tariffs are even remotely going to be real, but it’s a negotiating point,” he told investors.
Likewise, on a recent trip to China, Sebastien Breteau, CEO of QIMA, which conducts worldwide factory inspections and audits for major retailers, found few Chinese suppliers who believed Trump would implement what he has promised.
“He’s a man who can change [his] opinion 10 times in a day. So people don’t believe him. People don’t believe Trump is going to raise tariffs by 60 percent,” said Breteau, whose clients include Costco and Walmart.
Based on his past behavior, believing that Trump will back off of a core policy for being “too disruptive” seems unlikely to me. That’s a position I apparently share that position with Trump supporter and funder Elon Musk. He’s also warning Trump’s followers to be prepared for some immediate economic pain:
With just a week until the presidential election, Donald Trump’s close ally and major economic adviser Elon Musk is warning supporters to expect economic chaos, a crashing stock market and financial “hardship” — albeit only “temporary” — if Trump wins.
It sounds so extreme that Trump fans must either wonder why he had been so foolish as to say the silent part out loud, or maybe hope that the whole story is made up — “fake news.”
But it’s very real.
Billionaire Musk, Trump’s would-be budget-cutting and government-efficiency czar, also says there will be “no special cases” and “no exceptions” when he starts slashing federal spending after Trump takes office.
Speaking on a “telephone town hall” with supporters Tuesday, Musk promised deep federal budget cuts, austerity and economic pain ahead in a new Trump administration.
“We have to reduce spending to live within our means,” Musk said. “That necessarily involves some temporary hardship but it will ensure long-term prosperity.”
Granted in this case, Musk is speaking about cutting 2 trillion dollars in government spending, but it’s part of a large pattern of Trump proposed policy positions that apparently want to save the American Economy by killing it and, with it, many of Trump’s own supporters. See also the plans for mass deportations of farm workers, which would cost both American food producers and American consumers billions in the short term as well.
To that point, Musk doubled down on the “necessary economic hardship” on Twitter, agreeing to this “best case” scenario:
I know some anti-anti-Trump commenters will say “but this is only a short-term pain for a better America going forward.” My only response is to remind them of everything they have written about the inflation we experienced during the first few years of the Biden administration and how unacceptable it was.
Some may also suggest it will be fine because Trump will be tapping brilliant people like Elon Musk to help. And Musk promised things will turn around by the midterms in that discussion.
To that, I’ll gently remind them that Musk bought Twitter a little more than 2 years ago, and its financials haven’t significantly improved (according to some they have gotten worse). Tesla has done a little better; its stock price has still been essentially flat over the past two years (and spent some of that time at least $50/share underwater).
So I’m not exactly feeling comfortable taking his promises to the bank–especially when it’s setting up conditions for Elon to get even richer while a lot of Trump’s supporters (and many of the rest of us) continue to get poorer.
BTW, that’s all before we get to Speaker of the House Mike Johnson’s promise to finally get rid of Obamacare, which I’m sure will help reduce costs for those living at or near the margins.
“My only response is to remind them of everything they have written about the inflation we experienced during the first few years of the Biden administration and how unacceptable it was.”
That’s about right.
This is not politics and subjectivity – they have gotten worse. Anyone in finance knows this from the metrics available. Which of course surprises no rational observer given the increasingly public erratic behaviour and Howard Hughes type irrationality that is emerging.
The Tesla scenario is more surprising.
The Fischer person… I don’t have words for that.
Accelerationism has been a really dumb idea of the far left for ages, and it’s kind of baffling that anyone on the right would look at it and say “that’s a great idea!”
On the other hand, Republicans may have found a way to cut immigration — by making the US so horrible no one would want to come here.
@Gustopher:
Last month Kevin Drum had a chart showing exactly that. He charted border crossings and job demand. Over the last ten years they track very closely.
I said of Reagan that his plan was to ship all the jobs to third world countries, turn us into third world country, and then meet the jobs coming around the backside. Seems to still be the GOP plan. But I wasn’t cynical enough to realize they could use turning us into a third world country to their advantage by blaming Dems and ill defined elites. Live and learn.
Oh, ye of little faith.
When Xlon Cisgender God Mars Emperor of Phobos realizes foreign governments don’t pay tariffs, he’ll say “F*ck them!” And then he’ll sue them.
Besides, the Social media Fair Access Act will require all US citizens, residents, illegal immigrants, tourists, and people who fly over the country to pay for a Xitter blue check subscription, or whatever it’s called, under penalty of five years imprisonment and confiscation of all their property. And if that means shooting down an Air Canada flight to Cancun, then so be it!
@gVOR10: Naomi Klein’s book Disaster Capitalism has a lot of good information about how conservative think tanks leap in wherever there is a major disaster in the US with ready-made plans for rebuilding by privatizing schools, etc. The Patriot act, a response to 9/11, is mostly ideas for the government that were floating around before then that were deemed to extreme, repackaged and delivered right after the crisis. Lots of examples.
I guess Trump and Musk are tired of waiting, and want to manufacture the disaster.
@Lounsbury: It really is “Black is White”, “Up is Down”, “Ignorance is Strength” territory, isn’t it? I don’t really have words for it either.
California Air Resource Board just voted for their own tariff on Chinese goods. Actually, all goods that enter through a CA port.
@JKB: what’s good for Trump is good for California, no?
(Are you actually certain that California is being serious about this tariff, or are they doing this to send the Magatrons into a tizzy and show how much of a bunch of hypocrites they are?)
Remember when Mexico paid for the border wall? It’ll be the exact same with foreign governments paying these tariffs, QED.
@JKB:
Ok, so to make my position on tariffs clear:
On a whole, I don’t think they make sense in our modern global context. And I think most economists would agree with that. Especially in cases where there are no comparable domestic products.
I also can see narrow cases where there is an argument for the protection of domestic industries where there are comparable products. As a wine drinker, I can understand putting protectionist tariffs on foreign wines. I don’t know if I would fully agree, but I also try to drink locally-produced wines already because I have that regional luxury.
However, to go to an early J. D. Vance stump speech, despite his assertion, there are no domestically produced consumer-grade toasters. Blogs have literally been created over this search. The closest thing that I found after searching is a $120+ USA made commercial toaster. However you are not buying that at Walmart when you need a toaster, so you are paying the tax.
I have also gone on record repeatedly (and almost did again in the article) saying that just as I don’t agree with most of the Trump tariffs, I don’t agree with them under Biden either. In fact, I try when I can to refer to them as the Trump/Biden tariffs for that reasons, because both administration own them.
Which get’s to the final point–you clearly disagree with Biden’s economics. But do you agree with his maintaining the tariffs? And then, to @Grumpy realist’s point, if you are trying to bothsides me with California Air Resource Board’s embrace of tariff’s does that mean that you agree with other things they do?
Or do you simply expect me to be such a simple partisan that because it’s from CA (or the Biden administration) that I automatically agree?
Beyond all of that, what you just did was a weak-ass attempt to deflect from the core points of my post–which suggests that, once again, you have no substantive or grounded response to my points.
@JKB:
“ California Air Resource Board just voted for their own tariff on Chinese goods”
An increase in the tax on diesel fuel is not a tariff by any stretch of the definition.
In my Mr. Rogers voice…
Judas Iscariot on roller skates. Remember what happened when Nixon balanced the budget? I do. IIRC, it only took 3 presidents and 12 years to get past that.
Still, Xion Cisgender God Mars Emperor of Phobos is likely to discover that money doesn’t buy security when you live in the true third world sh##hole the Orange One believes we should become. However, I am but an old senile Luddite. Maybe all y’all will be luckier than I anticipate.
@Flat Earth Luddite:
My middle school choir director used to exclaim, “Judas Priest on a pony!” which Google now informs me was apparently said by Roscoe P. Coltrane in Dukes of Hazzard. I get that these are all to avoid blaspheming Jesus Christ, but what’s the roller skates or pony part supposed to be?
@Franklin:
This was something my late grandmother used to say when I was a child, teenager, and adult.
This left me with an indelible image of the last supper, with Judas coming in (stage left) on roller skates followed by the Roman legionnaires, going around the table twice, smacking Jesus upside His head pointing Him out to the Romans and then exiting stage right.
This possibly explains why in later years I was not considered an outstanding Sunday school teacher for the middle school students.**
Her other frequent comment was Jesus H. Nixon Christ. To say she was not a fan of established 1950’s suburban Christianity or the then former VP (& later president) is a vast understatement.
**Of course, this ignores the question of why they thought Luddite would be a good Sunday school teacher in the first place. Mysteries remain mysterious, eh?
@JKB:
On Calif AQB (non-elected super-board) it will drive more shipping to the ports in Prince Rupert BC (closer by rail to Chicago) and Seattle-Tacoma = job loses in Calif. The question is whether the CA voters will eventually get fed up and do another Prop 13 rebellion (almost 50 years ago – where the cure might be wore than the disease).
@Matt Bernius:
Have you checked for German toasters? I have a feeling that it would be a brown tariff.
@Jay L Gischer: yes…. it is hard even to formulate a response, being in the territory of cutting off one’s nose to spite the face and proclaiming it shall make one more handsome.
Although perhaps useful for last minute scaremongering ads, plucked quotes
@TheRyGuy:
I’m happy to–but first I want to call out your “anonymous warnings”–perhaps you didn’t read the post closely enough but (1) these are on the record warnings from Business Leaders and the President’s Advisor Elon Musk. So these are not anonymous warnings. They are not even warnings: they are saying what they WILL DO.
Also, I want to note that Trump’s policies in 2016 were far less extreme at the time. And they were mediated by advisors who have now been kicked out of the planned next administration. So we’re not exactly covering apples and oranges.
And then we can talk about how the tariffs that were put in place negatively impacted the economy (see https://taxfoundation.org/research/all/federal/trump-tariffs-biden-tariffs/ as one example–I choose that one because it’s also critical of Biden).
There’s also this one from Forbes about their negative impact:
https://www.forbes.com/sites/stuartanderson/2021/05/20/trumps-tariffs-were-much-more-damaging-than-thought/
Should we also discuss the impact of Trump’s trade war tactics on American farmers?
https://www.cnn.com/2022/05/08/politics/soybean-farmers-china-tariff-trump/index.html
Or how about how his income tax reform expanded the national debt?
https://taxpolicycenter.org/briefing-book/how-did-tcja-affect-federal-budget-outlook
BTW, do you want me to go into all of the campaign promises that thankfully Trump wasn’t able to deliver on during his tenure? I mean if we’re talking records we should talk about that too, right?
When you don’t have an real defense, you throw up some empty bothsiderism.
But hey, I can do it too–I haven’t heard Trump supporters like you commenting on his mental and physical decline the way you commented on Bidens. I wonder why…
And you are entirely correct that inflation went up in the US during the Biden years. Strangely you leave out that it happened world wide, almost as if there was a global forcing event: https://www.worldbank.org/en/research/brief/global-inflation
And Biden’s administration has delivered results over time that are better than many Western nations: https://www.ft.com/content/088d3368-bb8b-4ff3-9df7-a7680d4d81b2
Maybe they will and maybe they won’t. And if they–including Elon Musk–are right, then the next few years have the potential to make 21-24 look pretty great in comparison.
@Matt Bernius: “And if they–including Elon Musk–are right, then the next few years have the potential to make 21-24 look pretty great in comparison.”
I’d say they have the potential to make 1928-32 look pretty great in comparison…