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Ozempic-maker Novo Nordisk A/S is planning to make more of its medicines for the US market locally; Boeing Co. risks a gummed up supply chain and higher aircraft costs it may not be able to pass on; Chinese online retailer Shein Group Ltd. is offering incentives to its top apparel providers to set up new production capacity in Vietnam.
Companies across the world are looking for cover from President Donald Trump’s frenzied tariff barrage, planning for the worst even as reversals and exemptions leave them desperately seeking clarity.
In corporate suites, executives are counting the potential cost of the tariffs, its impact on sales, profits and market shares. Many companies are putting “tariff task forces” in place as they look to mitigate the pain from the measures.
In his early weeks in office Trump imposed tariffs on about $1.4 trillion of goods imports from Canada, Mexico and China — more than triple the $380 billion worth of Chinese merchandise hit with such levies during his first term, according to estimates from the Tax Foundation. He later delayed and scaled back those threats on Canada and Mexico. But his efforts to rewire the US economy have rattled financial markets.
They have also left companies from carmakers Stellantis NV and Volkswagen AG to pharmaceutical firms Sandoz Group AG and Eli Lilly & Co. and retailers Walmart Inc., Target Corp. and Temu struggling to work out the impact and come up with a response. The confusion stems in part from how inextricably intertwined global commerce has become over the last few decades, making the outcome of such measures difficult to predict, according to Florent Menegaux, tiremaker Michelin’s chief executive officer.
“In a globalized world, the mechanisms are very complex. If you start to put tariffs, it becomes very, very delicate to understand what are going to be the consequences,” he said in an interview, noting for instance that for a vehicle assembled in the US, parts can cross borders 53 times — making tariffs a logistical nightmare.
While companies are still sifting through the ever-changing policy statements, there are some broad strands emerging. Many, like European automotive parts companies Continental AG, Schaeffler AG and Valeo SE say they have no choice but to pass on the higher costs to consumers.
“For us it’s clear: We cannot bear additional duties, and we are informing our customers about that,” Continental Chief Financial Officer Olaf Schick said in an interview. The German company has 20 plants in Mexico and generated a fifth of its group sales in the US last year.
The Trump administration is betting that tariffs can remake the US economy by forcing businesses that sell to customers in the country to make their products locally. While companies from tiremaker Pirelli & C SpA and pharma giant Eli Lilly are among several that have pledged to increase their US output, industrial groups warn that such projects could take a long time.
“A tire plant is not a simple assembly plant,” said Michelin’s Menegaux. “The minimum investment for a tire plant is $600 million. If you go as fast as possible, it takes three years before you can produce the first tire.” In the near term, the company will have no choice but to raise prices, he said.
Not all companies will be able to pass on the higher costs. Stellantis and Volkswagen could see the tariffs on vehicles they import from Mexico and Canada wiping out €5.21 billion of their earnings this year, Bloomberg Intelligence estimates. S&P this month downgraded Stellantis’ debt, citing the potential impact.
The owner of the Jeep, Ram, Chrysler and Dodge brands may import around 417,000 vehicles into the US this year from the two countries, according to BI senior industry analyst Michael Dean, who says intense competition and overcapacity mean it has “limited scope to pass this additional cost onto buyers.”
The automakers may eventually also face more levies on their imports from Europe. Trump has threatened 25% tariffs on the European Union, and pharmaceuticals, cars and agriculture have been identified as industries of particular concern.
If that happens, it makes it “more difficult for us because we import a lot of cars into the US from Europe,” said Volvo Car AB CEO Jim Rowan. “So then we need to start thinking about manufacturing more cars in the US. We have capacity in Charleston. So we could do that.”
For Boeing, while the tariffs will drive up costs for parts like the landing gear it purchases from Canada, the bigger worry is that procuring components will become difficult. CEO Kelly Ortberg told workers during a company-wide address that tariffs could turn into “a continuity of supply issue.”
Keeping supplies moving smoothly are also a concern for US retailers like Target and Walmart that source their wares from countries like China. They are expecting potential price increases even though they are not yet sure what the tariffs will entail.
“Depending on the level of tariffs, we’re going to have to take some level of action,” Target CEO Brian Cornell told reporters last week.
Walmart has asked some Chinese suppliers to lower their prices by as much as 10% per round of tariffs, essentially getting them to help shoulder the cost of Trump’s duties. That’s creating angst among some vendors, already working with razor-thin margins, and has drawn the ire of the Chinese government.
Online shopping giant Temu has gone so far as to make tweaks to its business model, giving up substantial control of its Chinese supply in the face of new tariffs. At the risk of driving up prices on the budget shopping app, the company is asking factories to ship their own products in bulk to American warehouses, adopting what it calls a “half-custody” framework where it only manages the online marketplace.
Some companies like Switzerland’s Galderma Group AG — maker of the popular skin cream Cetaphil — are looking for other markets to offset some of the effects of tariffs.
“We always have the opportunity to shift sales to the international markets where we have very, very strong progress,” CEO Flemming Ornskov said in an interview.
But that might be easier said than done. The US makes up around 40% of Galderma’s sales.
For drugmakers, the impact will depend on whether the actual product or the active pharmaceutical ingredient is targeted, industry executives said. If it’s the latter, many of the biggest drug companies would be hit since that base ingredient is largely produced in China and India, they said.
Sandoz, which manufactures generic drugs largely outside of the US, said it’s unlikely to increase manufacturing in the country unless there are fundamental changes in how drugs are purchased, suggesting prices of its medicines will rise.
“In the short term, I think it will drive even more patient-access instability,” the Swiss company’s CEO, Richard Saynor, said in an interview. In the medium term, pricing increases will be passed on to payers and ultimately to patients, he said.
Eli Lilly, meanwhile, said it will spend at least $27 billion to build four US manufacturing plants that will come online within the next five years, three of which will make active ingredients.
For its part, Pfizer Inc. is more vulnerable to tariffs on the EU, where the drugmaker has manufacturing plants, CEO Albert Bourla said. The company has at least 10 plants across Europe, according to its website.
“We are waiting to see how that could play out,” the executive said.
--With assistance from Charlie Zhu, Lulu Shen, Madison Muller, Daniele Lepido, Paula Doenecke, Ashleigh Furlong, Jaewon Kang, Brendan Murray, Eric Pfanner, Rafaela Lindeberg, Wilfried Eckl-Dorna, Lily Meier, Monica Raymunt, Sonja Wind, Allyson Versprille, Zheping Huang, Daniela Wei and Luz Ding.
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