While some U.S. companies are taking the President\u2019s advice to \u201ceat the cost\u201d of the tariffs, forecasters doubt that corporations will want to keep on sacrificing profits for much longer.<\/p>\n
In July, General Motors reported that they lost more than $1.1 billion in order to absorb tariff costs. On the other hand, Nike is planning price hikes to offset their projected increased costs of $1 billion due to tariffs on their offshore production. Most other retailers are also planning on passing off the new cost of doing business to their consumers.<\/p>\n
Coupled with this, the dollar is taking a hit. The dollar is down -8.87% so far this year, with economists projecting more dips to come.<\/p>\n
So what does this mean for American consumers and small businesses? Here\u2019s what you can expect \u2014 and how to prepare as the economy continues to roil under the impact of the tariffs.<\/p>\n
\u201cThe top-down macro evidence seems clear: Americans are mostly paying for the tariffs,\u201d said George Saravelos<\/a>, global head of FX research at Deutsche Bank. \u201cThere is likely more pressure on US consumer prices in the pipeline.\u201d<\/p>\n Initially, the President insisted that tariffs would make prices fall and improve the economy. At a rally after his inauguration, he said, “I always say ‘tariffs’ is the most beautiful word to me in the dictionary. Because tariffs are going to make us rich as hell. It’s going to bring our country’s businesses back that left us.”<\/p>\n However, companies that rely on offshore products and production cannot charge so quickly. In spite of the President\u2019s promise that \u201cThe country will be making a fortune\u201d, CNN reports<\/a> that all the tariffs averaged now put the U.S. at an effective tariff rate of 22.8%, the highest of any developed country in the world. Trade has slowed significantly, and economists warn that warehoused goods that were bought ahead of tariffs will run out. Will businesses now import goods at more than double the cost? Economists say stores are more likely to leave their shelves empty.<\/p>\n The double whammy of higher prices and reduced availability of products is likely to hit U.S. shoppers hard.<\/p>\n Story Continues <\/p>\n \u201cWith little relief on import prices, domestic firms are stomaching the cost of higher tariffs and starting to pass it on to consumers,\u201d Wells Fargo economists Sarah House and Nicole Cervi said in July.<\/p>\n However, there are some foreign suppliers absorbing part of the cost of tariffs. CNN reports that export prices in Japan have shrunk for three straight months, and Japanese automakers have reduced prices on cars exported to the U.S. by a record amount.<\/p>\n For other foreign companies, however, the decreased value of the U.S. dollar has caused them to raise prices to ensure they\u2019re getting the full value of their provided goods and services. Deutschbank reported that the U.S. dollar is off to its worst start to a year since the 1970s, so the cost of doing business will likely continue to increase. Margins are also plummeting for U.S. businesses according to the producer price index.<\/p>\n \u201cIf consumers and foreign firms are not bearing tariff costs, domestic firms are. That is something that eventually should be reflected in corporate earnings announcements,\u201d said Citigroup chief U.S. economist Andrew Hollenhorst in July.<\/p>\n Read more: Nervous about the stock market? Gain potential quarterly income through this $1B private real estate fund \u2014 even if you\u2019re not a millionaire. Here\u2019s how to get started with as little as $10<\/a><\/p>\n