Global brands prepare to hike prices as trade war could spread inflation beyond US

Australia Broadcast Center

2 days ago

Australian shoppers could soon see higher price tags, as some brands affected by Donald Trump's trade war prepare to increase prices beyond the US market.
German shoe manufacturer Birkenstock is among the global retailers set to raise prices across the board to spread out the cost of tariffs.
Birkenstock's chief financial officer Ivica Krolo told an investor briefing this month that spreading the cost would mean modest price rises across the board, rather than a big hike in the cost for US purchasers.
Mr Krolo added that, "pricing is not the only lever we have though … additional levers include efficiencies in production, vendor negotiations, the optimisation of product mix and the allocation of products between the different regions."
One of the world's biggest jewellery brands, Pandora, is also eyeing price rises. It primarily produces its products in Thailand.
The Danish jeweller outlined the scenarios of tens of millions of dollars in cost increases due to US tariffs in its first-quarter interim financial report, saying: "the extent and timing of further price increases to be determined based on the concrete circumstances."
Meanwhile, analysts are closely monitoring the outlook for Apple and Samsung, given Mr Trump has threatened a 25 per cent tariff on smartphones not made in America.
"If iPhones got built in the US, you'd be looking at iPhones in Australia that go up three times from where they are today," Wedbush Securities analyst Dan Ives told The Business from New York.
"It's not just about the US consumer, it's about the foundation of all the costs that are increasing around the world."
Economists say the rationale for multinational firms to spread the cost beyond the US is to avoid dampening demand from American consumers, which is a large and crucial market, by having them foot the bill entirely.
"If they impose all of the price increase on the US consumer, that could do a number of things, which is reduce demand significantly by the US consumer," former Commonwealth Bank chief economist Stephen Halmarick told The Business.
The impact could be felt around the world in a matter of weeks and months.
"As we get into June, July, August, you're going to see price increases around the world," Mr Ives said.
When the Reserve Bank board cut interest rates in May, it highlighted the risk to the global economic growth outlook posed by the trade war.
It also emphasised that local inflation pressures had eased, and inflation was "expected to remain around target", opening the door to further rate cuts.
"We see two more cuts, one in August and one in November," Jarden chief economist Micaela Fuchila said.
"We have inflation under control, the labour market is in a good place, and there are some signs that the economy is recovering."
Despite the focus on the downside risk to global growth, the RBA has acknowledged the potential for global price hikes — although deputy governor Andrew Hauser doubts the longevity of the strategy.
In Melbourne, this fabric manufacturer shares similar concerns.
"The biggest worry for me is higher pricing will mean less demand, which means less requirements for product, which will definitely impact on future projections and buying," Steve Tsonidis, the general manager at ABMT Textiles, told The Business.
ABMT exports a third of its products to the US, with fabric produced here and garments made in Vietnam and Bangladesh.
The RBA's base case is that the trade war will put downward pressure on inflation here, but it has considered scenarios where prices could rise.
"There are possibilities that if this goes far enough and it impairs global supply chains, that could push inflation up here and everywhere else for a period," Mr Hauser said.
The RBA board next meets in early July, just before the pause on the US "reciprocal" tariffs affecting more than 50 nations is due to expire.