Corporate America awaits the aftershocks of Trump the Tariff Man.
The Trump administration said on Friday it would implement 25% tariffs on Mexico and Canada starting today and 10% on China, ending weeks of speculation.
No formal announcement has been made as of this writing.
In total, the US does roughly $1.6 trillion in business annual with the three economic powerhouses. Trump has been increasingly vocal on the need for tariffs against the countries since taking office in January as a means to promote his America First economic agenda.
EY chief economist Greg Daco estimates US GDP would contract by 1.5% in 2025 and 2.1% in 2026 if the tariffs kick in as they would "dampen" consumer spending and business investment. Inflation would rise by about 0.7% in the first quarter, Daco projects.
"Rising trade policy uncertainty will heighten financial market volatility and strain the private sector, despite the administration’s pro-business rhetoric…The Federal Reserve’s response will also be critical. If tariffs drive inflation expectations higher, the Fed may feel pressured to keep rates restrictive for longer, tightening financial conditions and weighing on growth momentum,” Daco said in a client note.
As markets brace for tariffs and potential downward revisions to profit estimates by companies, leaders are staying in action mode on the hot button topic.
Here's what top leaders at public companies have told me on the possible impact of tariffs from the Trump administration over the past two weeks. The takeaway: public companies are better prepared to withstand tariffs than during Trump's prior stay in the White House.
"We've done a lot of scenario planning and we know the levers that we can pull to minimize any impact. But having the opportunity to talk to the president, I really believe he wants a strong manufacturing sector because it's good for the economy."
Barra continued (video above), "Well, I think he [President Trump] very much understands exactly what the ramifications will be [of tariffs]. And I think they've been very clear that they want to make sure there's the right and balanced relationships with many of the different countries that they're talking about to accomplish the goals of his administration. So I do think he has a very good understanding of the implications of tariffs or changing IRA [Inflation Reduction Act] or the stringency from a [emissions] standards perspective."
GM didn't bake in Trump tariffs into its 2025 EPS outlook, unnerving investors.
In a December interview, Barra told me tariffs would lead to higher prices for cars and trucks for consumers.
"I would tell you, stabilization right now is prudent. There will be a lot of change, which is happening, and you're seeing that come out. In the last couple of weeks since the inauguration, we've obviously been doing our work around scenario modeling and planning tariffs. You have to differentiate what is a company-specific, industry-specific, or just general enterprise business-specific implication of each of these."
"We don't know exactly what tariffs are going to be put in place. But we have been working on this for several quarters. We have now multiple scenarios, and as soon as we know what the final plan is going to be, we will put one plan in place or not. This is something that we have learned over the last years how to manage so I think we have now good expertise on how to manage that in a way that will create a minimum impact on our customers."
Lores continued, "Especially on the PC side, China is a big manufacturing place for us, but over the last couple of years, we have been diversifying down because we learned during COVID that cost wouldn't be the only driver of our supply chain. We needed to improve resiliency. We have been aggressive improving our resiliency, moving manufacturing sites to other parts of the world. So now the situation is much more balanced, and we think that compared to other companies in our industry, we're in a much better position."
Williams Sonoma CEO Laura Alber (right) talks with Yahoo Finance executive editor Brian Sozzi at the World Economic Forum in late January. Alber says she is working to minimize the impact of any tariffs, in part by making more products in the United States. ·Yahoo Finance
"In the first Trump administration, we saw the first wave of tariffs, and we reduced our China exposure by 50%."
The home goods and furnishing retailer now relies on China for 25% of its sourcing, Alber says.
"We aren't waiting for the next wave of tariffs," Alber added. We've been working to continue to move our product elsewhere. So whether it's elsewhere in Asia or even in the United States. Most of our upholstery furniture is made in Mississippi or North Carolina."
"It's a pressure point. But again, I think we can work through it, and we can manage it. I think we've lived with tariffs already. It's not a new concept and we've been able to navigate it.
Ralph Lauren once relied on China for 50% of its sourcing. Today, that number is close to a mid-single-digit percentage, Louvet said.
"China has some unique expertise in certain categories for us. You know, some of our more sophisticated sweaters are made in China. Some of our more sophisticated footwear is made in China. I think under duress, we could always find alternatives. And as you can imagine, we're running all types of scenarios to be prepared. But again, what's important for us is multiplicity of sourcing options," Louvet added.
"So we've been stockpiling the products in Europe, but it's not enough. How long would it last? I think at least a year. We are preparing for that tariff from the European continent, and vice versa. We've been preparing for it because that dispute has been studied well before."
"Our team has done an incredible job over the last several years, diversifying our global manufacturing footprint. Less than 10% of our product is coming from China. We've got Southeast Asia, Central America, Europe, India. We've got various various different places, in ways that we've been developing over time, and we continue to develop even new markets for product development. So tariffs, they'll come, but ultimately, it's our job to figure out the value proposition and make sure that we present our consumers with the best product, at the best price, with the best execution."
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Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on X @BrianSozzi, Instagram and on LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
