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If former President Donald Trump wins the presidential election next week and returns to the White House, he’s poised to massively raise tariffs on foreign imports. U.S. companies are readying their response — raising prices on consumers.
Trump has pledged to impose general tariffs of between 10% and 20% on all imports, along with a 60% tariff on Chinese goods. He’s also threatened a “100% tariff” on countries that “leave” the U.S. dollar and tariffs of as much as 2,000% on foreign-made vehicles.
Read More: Donald Trump and the trouble with tariffs
Although Trump has repeatedly touted his love of tariffs — “The most beautiful word in the dictionary is tariff,” he recently said — companies aren’t nearly as ecstatic.
“If there are 10% to 60% tariffs that get enacted on all of our trade partners, clearly that’s going to create some level of disruption,” Compass Diversified Holdings (CODI+6.21%) CEO Elias Sabo said on a recent earnings call. “You know, there is no way that any company can absorb those kind of tariff increases.”
In the past, Trump has argued that tariffs are protectionist measures designed to hit foreign companies and encourage domestic manufacturing.
“We’re going to bring the companies back,” Trump said recently. “We’re going to lower taxes still further for companies that are going to make their product in the USA, we’re going to protect those companies with strong tariffs.”
However, a 2018 study examining the short-run effects of Trump’s 2018 tariffs found that the small boost to protected firms was outweighed by higher input costs and retaliatory measures. Those tariffs also led to higher prices.
“We’re obviously very concerned” about higher tariffs on footwear and apparel, Columbia Sportswear (COLM+7.23%) CEO Timothy Boyle said on an earnings call. “We believe the argument about tariffs improving the domestic production of items such as footwear and apparel are fallacious.”
Companies producing goods of all kinds, from auto parts and clothing to baby products and shoes, expect to raise their prices if higher tariffs come down the line. That would especially impact lower-income Americans, who spend a larger percentage of their income on goods like food and clothing.
“It’s going to be very, very difficult to keep products affordable for Americans,” Boyle later told The Washington Post.
And other executives agree.
“If we get tariffs, we will pass those tariff costs back to the consumer,” Autozone (AZO-0.31%) CEO Philip Daniele said during a call last month. “We’d likely have to do some surgical price actions,” Stanley Black & Decker (SWK-0.91%) CEO Patrick Hallinan said on a call in May.
Even companies that expect to largely be unaffected by duty hikes are concerned. On a recent earnings call, Sleep Number (SNBR-1.28%) CEO Shelly Ibach pointed to the long-running semiconductor chip shortage, which put pressure on companies across various industries.
During his administration, Trump imposed almost $80 billion worth of new taxes through tariffs on products valued at about $380 billion in 2018 and 2019, according to the Tax Foundation. President Joe Biden’s administration kept most of those tariffs and added hikes on $18 billion worth of Chinese goods — such as semiconductors and electric vehicles — which comes out to a tax hike of $3.6 billion.
Together, those tariffs reduced employment by about 142,000 full-time jobs and cut gross domestic product by 0.2%, the foundation said. Trump’s proposed tariffs would hike taxes by another $524 billion a year, shrink GDP by 0.8%, and reduce employment by about 684,000 jobs. Notably, that estimate does not account for the possibility of a global trade war.
