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US Companies Warn: Tariffs Squeeze Margins
27 Jan
Summary
- Tariffs are raising prices for U.S. consumers, impacting company profit margins.
- Companies like Procter & Gamble and Amazon report consumer price sensitivity.
- A Supreme Court ruling in February could affect existing tariffs.
Many U.S. companies are warning investors that tariffs are impacting profit margins, with consumers growing resistant to higher prices. Bellwethers including Procter & Gamble and Amazon have indicated that sellers are passing on increased costs from tariffs, leading to higher prices on e-commerce platforms. Consumers, especially those with lower to middle incomes, are becoming more judicious, prioritizing value items.
This trend is becoming evident as companies like Tractor Supply and Levi Strauss anticipate "surgical" price increases and warn of softer consumer environments. Harvard University professors estimate that domestic goods have increased in cost by about 4.3% and imported goods by 5.8% due to tariffs. McCormick & Co. reported a significant drop in gross profit margins, directly linking it to increased tariff costs.
Industrial supplies distributor Fastenal also noted that tariffs inflated prices and hit demand, with plans for further price adjustments dependent on input costs and customer behavior. As of mid-November, the effective tariff rate on U.S. consumers reached 14.4%. A Supreme Court ruling in February concerning President Trump's use of the International Emergency Economic Powers Act could potentially lead to refunds for duties paid, though the White House plans to maintain import duties using other authorities.
