How companies are responding to Trump’s tariffs

Corporate America is scrambling to implement countermeasures as President Donald Trump’s latest tariffs on Chinese imports went into effect earlier this week, while some levies on Canada and Mexico have been suspended.

Potential price hikes, changes in sourcing locations and new US plants are among the actions planned since Trump unveiled the tariffs and threatened potentially more levies.

HIGHER PRICES

Best Buy warned of the possibility of higher prices for American shoppers. “The giant wildcard obviously is how the consumers are going to react to the price increases...,” CFO Matt Bilunas said on a call with analysts.

Target also warned about potential price hikes as it depends on lots of vegetables and fruit from Mexico during winter, CEO Brian Cornell said. “But if there’s a 25 per cent tariff, those prices will go up ... certainly over the next week,” he said.

SOURCING SHIFT

Target will move more of its sourcing for its store brands, which include All in Motion and Cat & Jack, to countries in the Western Hemisphere like Guatemala and Honduras, and away from China where 30 per cent of those products are made. It expects to further reduce that dependence to 25 per cent next year.

Kroger is working with its merchandising and sourcing teams to diversify the supplier base for some commodities in its fresh business, possibly shifting to geographies that will be less affected by the tariffs to keep prices low, CFO Todd Foley said on an earnings call.

Costco executives said the retailer’s so-called treasure hunt structure allows it to adjust its merchandise mix more easily than others, and possibly source products from countries that are not subject to tariffs. “With our flexibility, there are not many items we can’t find something else to replace -- or something else to bring in -- in that category,” CEO Ron Vachris said.

Alcoa has said it would likely reroute its Canada-made aluminium to Europe to avoid US tariffs, and send its Australian output to the US. “We would be optimising our global system based on any new tariff structures ... there is a potential for metal to come out of Australia and go into US if there is a massive tariff dislocation,” CEO William Oplinger told Reuters in an interview in January.

Hewlett Packard Enterprise said the server maker would leverage its global supply chain to mitigate aspects of an expected impact and adjust prices as well.

Bratz dolls maker MGA Entertainment, a major supplier of toys to Walmart and Target, told Reuters earlier this month that it was speeding up its shift out of China and taking steps to move 40 per cent of its manufacturing to India, Vietnam and Indonesia within about six months.

US SHIFT

Honda has decided to produce its next-generation Civic hybrid in the US state of Indiana, instead of Mexico, to avoid potential tariffs on one of its top-selling car models, three people familiar with the matter told Reuters.

Pfizer said it might move overseas manufacturing to its existing plants in the US, if required. “If something happens, we will try to mitigate it by transferring from manufacturing sites outside to the manufacturing sites (in the US),” CEO Albert Bourla said at the TD Cowen healthcare conference.

NEW INVESTMENTS

Apple in late February unveiled $500 billion in US investments in the next four years that will include a giant factory in Texas for artificial intelligence servers.

Drugmaker Eli Lilly said in late February it planned to spend at least $27 billion to build four new manufacturing plants in the US over the next five years. Johnson & Johnson said in late March that it planned to invest over $55 billion over the next four years to establish manufacturing facilities and research infrastructure in the US.