Tariffs hit U.S. companies hard, but businesses absorb them for now

Washington Post

5 days ago

The Trump administration's tariffs are hitting companies that do business in the United States. But prices haven't reflected them yet in many cases.
In earnings reports, multiple companies on Monday and Tuesday blamed tariffs for hurting their bottom lines, including automakers General Motors and Stellantis.
General Motors said on Tuesday it is facing a $1.1 billion hit from tariffs. The automaker reiterated projections that the full year tariff impact could reach $4 billion to $5 billion.
GM's net income fell to $1.9 billion in the second quarter, down more than 34 percent year-over-year. At the same time, U.S. year-over-year sales rose 7.3 percent for the second quarter of the year. GM released its second-quarter results the day after Stellantis, whose brands include Chrysler, Dodge and Jeep, said it faced about $350 million in tariff costs in the first half of the year.
'Currently automakers are essentially subsidizing car buyers for now, and these tariff costs are eating into their profitability,' said David Bieri, a public policy professor at Virginia Tech. 'And that's definitely not sustainable.'
GM hasn't raised prices on their vehicles because of tariffs, a company spokesperson said.
'The months ahead are shaping up to be 'the big squeeze,' as the real headline this summer will be the growing disconnect between rising costs for automakers and dealers and relatively flat consumer prices,' Erin Keating, an executive analyst at Cox Automotive, said in a July report.
More people have been coming to Maryland car dealer Robert Fogarty's two locations to buy cars out of fear of tariff-driven price increases, he said. He noticed a marked surge in people coming into his dealerships in April to lock in prices.
'We are taking it day by day,' said Fogarty, whose dealerships are in Silver Spring. 'Having clarity would be helpful to manage inventory and customers.'
Automakers might increase prices moving forward, according to a report from the intelligence firm AlixPartners. It noted that automakers are expected to pass on 80 percent of the cost of Trump's tariffs to consumers.
'You can grow sales or protect profits on the tariffs but you can't do it indefinitely,' Bieri said. 'In the short run, profits will soften. In the long run, consumers will pay higher prices,' he added, and said that he considered GM the 'canary in the coal mine.'
GM depends on foreign production of vehicles more than many of its competitors. It imported more vehicles to the U.S. than Toyota, Hyundai, Stellantis, Honda and Ford in 2024, according to the intelligence firm GlobalData. Almost half of vehicles GM sold in the U.S. were imported last year, the firm found.
The automaker said Tuesday it is trying to offset 'at least 30 percent' of the annual tariff impact, pointing to its recently announced $4 billion investment into U.S. assembly plants as one way to do so. But they will take 18 months to come online, CEO Mary Barra said in a Tuesday letter to shareholders.
Trump this year announced a 25 percent tariff on auto parts and said that he 'couldn't care less' if vehicle prices rise as a result. There have been updates on the auto and auto parts tariff policy since, including a move from the White House to ensure they don't 'stack' on steel and aluminum duties.
Beyond the U.S. auto industry, other companies that cited tariffs for reducing profits include oil services provider Halliburton, which said Tuesday that tariffs lowered profits by $27 million in the second quarter.
A Swiss maker of fasteners with sales in North America, Europe and Asia, Bossard Group, linked tariffs and market uncertainty to 'a negative impact on demand,' Chief Financial Officer Stephan Zehnder said Tuesday.
But unlike some U.S. companies, Bossard is charging more for its products.
'We have the clear guideline to pass through the price increases to customers. So that means price increases to customers of 10 percent to 30 percent,' CEO Daniel Bossard said Tuesday during a call with analysts. 'You can imagine that's not a walk in the park.'
General Electric said this month that, assuming reciprocal tariffs are implemented after the current pause, it expects the net impact of tariffs to be around $500 million for 2025. The industrial giant said it would try to offset that through 'cost controls and pricing actions.'
Economists and industry observers said it's too soon for tariffs to show up in consumer prices.
Some companies stocked up on inventory earlier this year, anticipating the effect of tariffs. Other products were in transit when the levies were imposed and are just now landing on store shelves, economists said. And many companies might be eating cost increases to avoid turning off consumers already fatigued by inflation and pandemic-related increases, said Tara Sinclair, economics professor at George Washington University.
Uncertainty about the permanence of any tariffs — including the on-again, off-again nature of the import levies so far — and fear of drawing Trump's ire may be deterring companies from raising prices, some economists said.
'He's talking directly to the companies. He's telling them what to do,' said Justin Wolfers, an economics and public policy professor at the University of Michigan.
It's unlikely automakers would raise prices 25 percent to match the levy on foreign-made vehicles because it would be too expensive for consumers, industry observers said.
The average manufacturer-suggested retail price for autos was $50,000 in June, according to data from car-price and inventory tracker Edmunds. 'If we saw an essentially $10,000 bump in MSRPs, that would translate into the death of sales,' said Ivan Drury, Edmunds' director of insights.
Automakers will probably use the rollout of 2026 models to add new tariff costs, cushioning the blow of higher prices by tying it to more features, Drury said.
But cars are a durable good — typically among a household's top expenses — that families can postpone buying, said Francesco Bianchi, economics professor at Johns Hopkins University. That might make automakers more willing to take a hit on their profits in the short-term, he said: 'They know that there's a limit to how much prices can adjust.'