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Miami Herald
3 days ago
- Business
- Miami Herald
Layoffs? Price increases? Companies make hard choices as Trump's tariffs set in.
Barry Barr has taken a number of cost-saving measures in recent months to keep his outdoor apparel company afloat during President Donald Trump's destabilizing trade war. He froze his spending on marketing and even prohibited his employees from traveling to see customers. But while he waited for Trump's tariffs to come into better focus, he resisted making more consequential decisions at his company, KAVU True Outdoor Wear. He didn't raise prices on its fall lineup. He continued manufacturing bags, woven shirts, polar fleeces and other items at factories in China, India and Vietnam, even though Trump had signaled that those countries would face stiff duties. 'It's a sit and wait, honestly,' he said last month. 'We just don't know.' More recently, Barr was trying to wrap his head around the punishing new tariffs that were set to click on shortly after midnight Thursday. It was hard for him to know whether the slate of duties on about 90 countries would ultimately hold, given the ever-evolving nature of Trump's trade policy. On Wednesday, Trump signed an executive order that would double tariffs on India, to 50%, beginning this month in an effort to stop the country from buying Russian oil. He also threatened to impose a 100% tariff on foreign semiconductors. The latest tariff orders confirmed for Barr that he would have to raise prices and lay off employees in the months ahead. 'There will be some tough decisions to be made for sure,' he said. 'You have to put your big-kid pants on and do it.' Barr's thinking is emblematic of the shift in strategy occurring at companies across the country. For manufacturers, retailers and other businesses that rely on imported goods, Trump's tariff policy has become an exercise in forbearance. Since the spring, companies have had to contend with a series of delays, fresh threats and haphazard deals that have scrambled their ability to make long-term decisions. 'We kind of saw this summer as a holding period for a lot of firms,' said Courtney Shupert, an economist at MacroPolicy Perspectives. 'Firms were saying, 'Let's wait and see if demand is going to be stronger or weaker.'' But now that many of Trump's tariffs have officially set in and his trade policy seems to be solidifying, many companies are concluding that they can no longer afford to hold back. On recent earnings calls with investors, public companies including shopping conglomerate QVC Group, footwear brand Allbirds and eyewear vendor Warby Parker openly talked about their tactics to handle the escalating tariff costs, including increasing prices. 'I think we can, over the medium term, mitigate the impact of tariffs,' Andrew Rees, CEO of the footwear brand Crocs, said Thursday. He outlined plans to raise prices, reduce business expenses and wring savings out of the company's supply chain, including by negotiating with factories. How quickly businesses act could have wide-ranging implications for the economy. Should more companies decide to pass on price increases to consumers, that could push up inflation and chill consumer spending. Many companies in recent months also hesitated to fire, or hire, workers amid the tariff unpredictability, reminiscent of the labor hoarding after the worst of the pandemic. If companies begin to have more confidence in the tariff rates, that moratorium could break. Indeed, the latest jobs report from the Labor Department, which was released Aug. 1, suggested that businesses might be closer to that tipping point than previously thought. 'As policy is resolved, if tariffs are biting more than firms were expecting, that could be impactful for their hiring decisions,' Shupert said. Officials at the Federal Reserve are closely watching inflation and the labor market for signs that the tariffs are affecting the broader economy, even as many forecasters acknowledge that it could be some time before the full effects are known. 'These tariff shocks are unlike anything that we've seen in 100 years, virtually,' Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said in an interview on CNBC on Wednesday. 'And it's taken a while for businesses to try to process it.' In several interviews by phone and text message in recent days, Barr, who started KAVU in 1993, recounted how his business had contended with mounting pressure because of Trump's tariff policy. Barr has long paid some levies on products. But the extra tariffs that Trump revealed in April, which included since-modified duties of 46% on Vietnam and 26% on India, were much more onerous. At first, Barr chose to swallow Trump's baseline 10% tariff, as well as tariffs against China that had already kicked in. But as the trade war dragged on, he started to consider other solutions. 'There's absolutely no way I can make a profit this year absorbing all these tariffs,' Barr said. 'It's bigger than any tax bill I've had to pay.' His foreign suppliers lowered their prices slightly to account for the cost of the tariffs, which helped somewhat. Barr weighed manufacturing some items in a factory his company works with in Seattle but decided against it, in part because it would be too expensive and impractical to import the sewing machines he would need. He was also concerned that the tariffs would make buying fabric and other raw materials from abroad too costly. He is looking into whether he could move some production to factories in Central America but is not yet sure it will be possible. As the tariff landscape began to take firmer shape, however, Barr started to enact deeper changes. He chose not to raise prices on items in KAVU's fall lineup, even though the items were subject to some tariffs when they arrived in the United States this summer. But the persistently high tariff rates compelled him to increase prices for next year. KAVU products are sold in about 2,000 U.S. retail locations. The company also exports its goods to 26 countries. Working off the assumption that tariffs for Vietnam and India would settle around 10%, and China around 37.5%, Barr increased retail prices for his company's summer 2026 line by about 15% to 30% -- the most he believed customers would pay. Under the new pricing, the retail cost of a pullover made in China would rise to $120 from $90. A button-down shirt produced in India that used to retail for $80 would be $105. But with the tariff rates settling higher, Barr is now worried he will have to raise prices even more. The U.S.' trade deal with Vietnam, for instance, stipulates a 20% tariff on goods from the country, and India is facing 50% tariffs. At the same time, KAVU's preseason sales for next summer came in 15% lower compared with sales for this summer season. With his profit margin shrinking and business expenses already shaved to the bone, Barr said he would probably have to lay off some of his 28 employees in the next three to four months. 'You've got to save money somewhere so the company can move ahead,' he said. Frustrated, Barr has been speaking to members of Congress about the effect of Trump's trade policy on small businesses like his. 'What we need to thrive is stability and not chaos,' Barr said during a virtual news conference with Sen. Patty Murray, D-Wash. And while he still fears that the tariffs will severely hurt KAVU, he hopes his company can pull through with the right adjustments. 'We can fight hard to survive,' Barr said. 'That's all we can do.' This article originally appeared in The New York Times. Copyright 2025
Business Insider
15-06-2025
- Business
- Business Insider
The Scared Stiff Economy
There's no such thing as the perfect time for a big decision. But when I reached out to Julia Coronado, the president of the economics consulting firm MacroPolicy Perspectives, to ask whether it's a good moment to take a significant financial risk, at least in the relative sense, her succinct email reply was telling: "Lol, short answer is no!" Given how complicated major transactions can be, there are plenty of caveats and counterexamples. On the whole, however, it is a particularly bad time for many major moves financially. Given everything that's going on right now, economists and personal finance gurus say that if you're treading water or feeling extra uneasy, you're not alone. " Uncertainty" is the word of the moment. America's tariff policies have shifted dozens of times since President Donald Trump took office. The stock market has been all over the place. The volatility emanating from the White House on immigration, government spending, and the federal workforce is palpable. There are rumblings of a recession and a return of high inflation. Consumer sentiment is in the basement. Across the economy, people feel like they're stuck in place. It's not a great time to change jobs, given the cooling labor market. The housing market isn't terrible — there's a growing amount of inventory out there — but if you're looking to buy now, you're probably lamenting having missed the dirt-cheap mortgage rates of a few years back. People thinking about retiring soon are doing some rethinking, given the current economic and financial market precarity. "It's not that when there's uncertainty or more uncertainty that people stop and don't act, don't make the big purchase, don't make the investment," says Claudia Sahm, the chief economist at New Century Advisors, an investment management firm. "It's often that the bar is higher." The issue at the moment is that while it may be appealing to adopt a wait-and-see approach, later is not synonymous with better. That's the calculation many Americans are facing now: Do I hold out on making a move now while things settle down, or do I take the risk that things will take a turn for the worse? "All we can do now is kind of read tea leaves on the future," says Chris Woods, a financial advisor who founded Silvis Financial. There's that old Wayne Gretzky quote about skating "to where the puck is going to be, not where it has been." The issue is that it's hard to guess where things are headed. When you're building up to a major financial leap, you typically sit on it until some level of certainty hits. That's especially true in scenarios where there are serious penalties for changing your mind. I mean, sure, you can offload that new car six months later, but you'd probably rather not. Jonathan Parker, a finance professor at MIT, tells me that a big spike in uncertainty will cause people to delay major spending such as upgrading to a new car, noting that "you might want that money for other purposes." When people make a big financial decision, such as buying a house, investing, or retiring, they want some level of buffer. They leave space for the possibility that some unexpected need will pop up — a medical emergency, an unexpected broken-down car or leaky roof, a lost job, a death in the family. Ideally, consumers don't want to just barely make their mortgage, wind up suddenly tapping the money they stowed away in their stock portfolio, or skimp on their day-to-day needs in retirement. When they take leaps, they want to leave a little side pot available to avoid an unforeseen circumstance. There's only so much a person can control — doing the best job possible at work doesn't insulate you from layoffs or guarantee your pay will increase with prices. Uncertainty makes that buffer harder to calculate and feel confident about having in the future. "In a time of great uncertainty, it's probably not the time you want to stretch with a purchase," Sahm says. This uncertainty may be headache-inducing for individuals trying to make up their minds, but what it might mean for the broader economy is tricky. Consumer spending is America's economic engine — personal expenditures account for about two-thirds of GDP. Ironically, people being worried is, in part, supporting the economy. When consumers are concerned about prices going up, they may pull forward big purchases to get them out of the way now before they get more expensive later. If you're nervous about your washing machine or car going kaput soon or are just looking to upgrade, it may feel prudent to replace them sooner rather than later in case prices go up. This year, consumer spending has jumped because of people trying to get ahead of tariffs. Crummy feelings about the future of the economy have actually been a good thing, spending-wise. "This is one thing that has helped consumer spending stay up while sentiment has really cratered," says Scott Baker, an associate finance professor at Northwestern University's Kellogg School of Management. At the same time, once people have made these anticipatory purchases or start to batten down the hatches, they could bring down the economy with them. If someone decides to put off renovating their kitchen, it means the contractor, the workers, and the store selling the materials miss out on money. "Just the fact that all of this is happening generates a wave of uncertainty," Parker says. "It's a significant drag on the economy, and it's not clear how big, but it certainly is a drag." Anyone who says they know what will happen next is lying. To be sure, there are some areas where sitting on your hands is usually the way to go, such as investing. When the going gets tough in the stock market, one of the worst things people can do is panic and cash out at the bottom. If someone had done that, say, in the wake of Trump's "Liberation Day," they'd probably regret it now. "Markets fluctuate all the time, they will go up and down," says Siavash Radpour, the associate director of the Retirement Equity Lab at The New School's Schwartz Center for Economic Policy Analysis. "Not doing anything is often a good policy for people who don't know what's going on." My colleagues at Business Insider recently did a series of stories attempting to answer whether it's a good time to make big life decisions. They looked at starting a business (the answer was yes), buying a home (if you must, but maybe rent), changing jobs (no), investing in stocks (go for it, within reason), buying a new car (hop to it), and retiring (hold off). The advice in the stories is all helpful and enlightening, but it can also go only so far. Every decision in life involves risks, and the truest answer to "Should I do X, Y, Z?" is, "It depends!" There's no denying we're in a time of heightened uncertainty. Anyone who says they know what will happen next is lying. And it really feels like things could break in any direction. While the safest advice is probably that you should snap up that new car before tariffs push up prices by thousands of dollars, Trump could declare the tariff thing over tomorrow, and all of a sudden you've overpaid for no reason. "The market this year has been driven less by fundamentals and just more by the different news we're getting from week to week on what's going on," Woods says. Maybe you do hold off on buying a house and come to regret it five years from now when prices are even higher. Or, you don't retire, and you miss out on time with your grandkids, or you're so risk-averse about jumping ship from your company that you miss out on your dream job. Those decisions are harder to make now with more factors in play. It's not just whether a recession is coming, but also what the AI revolution means for the structural future of the labor market. The question for retirees isn't just whether they've saved enough; it's also what might happen with public assistance programs they'd long planned around. "There is the risk of what's going to happen to Medicaid, what's going to happen to Social Security," Radpour says. "Health expenses are really scary in retirement." Starting a new business is always risky — statistically speaking, half of new businesses fail in five years. Loans for starting said business are more expensive and harder to come by. While it may be a decent time for a startup, no plan is foolproof. Many people who start a company during downturns and turmoil are doing so because they've lost their job or someone in their household has, not because they're jazzed about the future. "The jump is made for them, in some sense," Baker says. Still, if you see a market opportunity and want to make the jump, the idea that economy could get bad shouldn't preclude taking action. Thinking through all of the ambiguity and confusion isn't fun. Financial risks are always scary, whether big or small. Now it feels like the anxiety is extra heightened, given the context. For many people, it's going to feel like they're damned if they do, damned if they don't.
Yahoo
13-05-2025
- Business
- Yahoo
Inflation cools in April and egg prices drop to lowest mark in months - but fears remain tariffs could spike prices
Inflation cooled slightly in the last 12 months through April and egg prices dropped to the lowest in months, but fears over the impact of President Donald Trump's global trade tariffs remain. Consumer prices have risen 2.3 percent in April compared with a year earlier, according to the Department of Labor. April's consumer-price index report is the first to capture the aftermath of Trump's 'Liberation Day' tariff announcements on April 2, causing the stock market to plummet, and the picture is unclear. Economists say it will likely take more time for the full impact of Trump's trade tariffs to be reflected in prices across the U.S. On a monthly basis, prices rose modestly, increasing 0.2 percent from March to April after falling 0.1 percent the previous month. Grocery prices fell 0.4 percent, pulled down in part by a big 12.7 percent drop in the price of eggs, which was the first decline in price in months. The report suggests the tariffs haven't yet impacted the prices of many items. Clothing costs fell 0.2 percent from March to April, while new car prices were unchanged. Furniture costs jumped 1.5 percent, however. The president has long argued that his global tariffs will boost American manufacturing and increase U.S. jobs. 'In the end it's going to be a beautiful thing,' Trump said last month. But economists have warned that it is the American people who will suffer higher prices. Economists are viewing this month's report as a way of 'testing the waters.' 'Firms have indicated ... that they are unsure how much of the tariff cost increase they can pass through to consumers without denting demand, and we expect some testing of the waters and a staggered pattern of price increases,' Laura Rosner-Warburton, cofounder of Macro Policy Perspectives, wrote in a note to clients. It comes as the U.S. and China agreed Monday to call a temporary truce to the trade war. The U.S. agreed to slash the tariff on Chinese imports to 30 percent from its current 145 percent and China, in return, agreed that it would lower its levies on American goods to 10 percent from 125 percent. Both nations would suspend their respective tariffs for 90 days as negotiations continue. But even taking that agreement into account, U.S. average import taxes remain at 90-year highs, economists said, which could worsen inflation in the coming months. Consumer prices cooled noticeably in February and March, prompting Trump to claim repeatedly on social media that there is 'NO INFLATION.' Inflation has fallen to nearly the 2 percent target set by the Federal Reserve, the agency charged with fighting higher prices. Inflation fell for the first time in nearly five years the previous month. AP contributed
The Hill
13-05-2025
- Business
- The Hill
Tariffs may have pushed up inflation a bit in April, government report to show
WASHINGTON (AP) — Inflation may have picked up slightly last month as President Donald Trump's widespread tariffs kicked in, a trend economists expect will become more visible in the coming months. Consumer prices are forecast to have risen 2.4% in April compared with a year earlier, according to data provider FactSet, the same as in March and down from 3% at the start of the year. Still, on a monthly basis, economists expect that the consumer price index rose 0.3% from March to April, a pace that would worsen inflation if it continued, after it fell for the first time in nearly five years the previous month. Tuesday's report could provide an early read on how Trump's duties will affect the prices Americans pay for necessities and other goods such as clothing, shoes, furniture and even groceries. Duties on many goods from Mexico and Canada took effect in February and could have impacted prices last month. Still, economists forecast the impact from duties to be modest. 'Firms have indicated … that they are unsure how much of the tariff cost increase they can pass through to consumers without denting demand, and we expect some testing of the waters and a staggered pattern of price increases,' Laura Rosner-Warburton, cofounder of Macro Policy Perspectives, wrote in note to clients. The Trump administration said early Monday that it had reached a deal with China to sharply reduce its tariffs on imports from that country. But even taking that agreement into account, U.S. average import taxes remain at 90-year highs, economists said, which could worsen inflation in the coming months. Tariffs on furniture, agricultural goods from Mexico, and on clothes and shoes may have boosted prices last month. Auto prices may have risen because car sales surged as Americans sought to get ahead of duties on new cars and car parts, reducing the need for dealers to offer discounts. Excluding the volatile food and energy categories, core prices are forecast to have risen 2.8% last month compared to a year earlier, the same as in March. On a monthly basis, they are expected to rise 0.3%, up from just 0.1% the previous month. It will likely take more time for the full impact of the duties to be reflected in prices across U.S. businesses, economists say. Items that were already in transit when the tariffs were imposed won't have to pay the duties, while many companies have built a stockpile of goods and could hold off on price hikes in hopes that tariffs will ultimately be reduced. Consumers, at least those outside the top one-fifth in incomes, are also more stretched financially than a few years ago and are more likely to resist price hikes, which could push firms to delay raising prices as long as possible. Consumer prices cooled noticeably in February and March, prompting Trump to claim repeatedly on social media that there is 'NO INFLATION.' Inflation has fallen to nearly the 2% target set by the Federal Reserve, the agency charged with fighting higher prices. Yet grocery prices have jumped in two out of the past three months, despite Trump's claims. He has also said gas has fallen to $1.98 a gallon, which is below the measured average in any state. AAA said Monday that gas costs an average $3.14 a gallon nationwide. On Monday, the White House said it has cut the tariff it imposed on Chinese goods from 145% to 30%, while China also sharply reduced its duties on U.S. goods. Both sides could add 24% tariffs after 90 days if they don't reach a broader agreement. The smaller import taxes will limit the damage to the U.S. economy, but combined with a 10% universal tariff already in place, plus larger import taxes on autos, steel, and aluminum, economists forecast they will still slow growth this year and worsen inflation. The Yale Budget Lab, for example, estimates that the average U.S. tariff will be nearly 18% even including the deal reached Monday between the U.S. and China. At that level, U.S. duties will be the highest since 1934. The Budget Lab calculates the tariffs will lift prices 1.7% and cost the average household about $2,800. And while Trump may tout his trade deals — such as the one with the United Kingdom reached last week — he has also said 'tariffs is the most beautiful word' in the dictionary, and is counting on revenue from duties to narrow the budget deficit, suggesting tariffs will likely remain high. The tariffs have also put the Federal Reserve in an exceedingly difficult spot, as Chair Jerome Powell acknowledged in a news conference last week. Powell said the duties have raised the risk of both higher inflation and higher unemployment, two challenges that rarely occur simultaneously. If unemployment rose, the Fed would typically cut rates to boost the economy, while if inflation worsened, the central bank would usually raise rates or leave them elevated.
The Independent
13-05-2025
- Business
- The Independent
Tariffs may have pushed up inflation a bit in April, government report to show
Inflation may have picked up slightly last month as President Donald Trump 's widespread tariffs kicked in, a trend economists expect will become more visible in the coming months. Consumer prices are forecast to have risen 2.4% in April compared with a year earlier, according to data provider FactSet, the same as in March and down from 3% at the start of the year. Still, on a monthly basis, economists expect that the consumer price index rose 0.3% from March to April, a pace that would worsen inflation if it continued, after it fell for the first time in nearly five years the previous month. Tuesday's report could provide an early read on how Trump's duties will affect the prices Americans pay for necessities and other goods such as clothing, shoes, furniture and even groceries. Duties on many goods from Mexico and Canada took effect in February and could have impacted prices last month. Still, economists forecast the impact from duties to be modest. 'Firms have indicated ... that they are unsure how much of the tariff cost increase they can pass through to consumers without denting demand, and we expect some testing of the waters and a staggered pattern of price increases,' Laura Rosner-Warburton, cofounder of Macro Policy Perspectives, wrote in note to clients. The Trump administration said early Monday that it had reached a deal with China to sharply reduce its tariffs on imports from that country. But even taking that agreement into account, U.S. average import taxes remain at 90-year highs, economists said, which could worsen inflation in the coming months. Tariffs on furniture, agricultural goods from Mexico, and on clothes and shoes may have boosted prices last month. Auto prices may have risen because car sales surged as Americans sought to get ahead of duties on new cars and car parts, reducing the need for dealers to offer discounts. Excluding the volatile food and energy categories, core prices are forecast to have risen 2.8% last month compared to a year earlier, the same as in March. On a monthly basis, they are expected to rise 0.3%, up from just 0.1% the previous month. It will likely take more time for the full impact of the duties to be reflected in prices across U.S. businesses, economists say. Items that were already in transit when the tariffs were imposed won't have to pay the duties, while many companies have built a stockpile of goods and could hold off on price hikes in hopes that tariffs will ultimately be reduced. Consumers, at least those outside the top one-fifth in incomes, are also more stretched financially than a few years ago and are more likely to resist price hikes, which could push firms to delay raising prices as long as possible. Consumer prices cooled noticeably in February and March, prompting Trump to claim repeatedly on social media that there is 'NO INFLATION." Inflation has fallen to nearly the 2% target set by the Federal Reserve, the agency charged with fighting higher prices. Yet grocery prices have jumped in two out of the past three months, despite Trump's claims. He has also said gas has fallen to $1.98 a gallon, which is below the measured average in any state. AAA said Monday that gas costs an average $3.14 a gallon nationwide. On Monday, the White House said it has cut the tariff it imposed on Chinese goods from 145% to 30%, while China also sharply reduced its duties on U.S. goods. Both sides could add 24% tariffs after 90 days if they don't reach a broader agreement. The smaller import taxes will limit the damage to the U.S. economy, but combined with a 10% universal tariff already in place, plus larger import taxes on autos, steel, and aluminum, economists forecast they will still slow growth this year and worsen inflation. The Yale Budget Lab, for example, estimates that the average U.S. tariff will be nearly 18% even including the deal reached Monday between the U.S. and China. At that level, U.S. duties will be the highest since 1934. The Budget Lab calculates the tariffs will lift prices 1.7% and cost the average household about $2,800. And while Trump may tout his trade deals — such as the one with the United Kingdom reached last week — he has also said 'tariffs is the most beautiful word' in the dictionary, and is counting on revenue from duties to narrow the budget deficit, suggesting tariffs will likely remain high. The tariffs have also put the Federal Reserve in an exceedingly difficult spot, as Chair Jerome Powell acknowledged in a news conference last week. Powell said the duties have raised the risk of both higher inflation and higher unemployment, two challenges that rarely occur simultaneously. If unemployment rose, the Fed would typically cut rates to boost the economy, while if inflation worsened, the central bank would usually raise rates or leave them elevated.
