As Trump tariffs hit, companies weigh price increases and manufacturing moves

Key Takeaways

• Executives have explained how they're handling import taxes on recent earnings calls, with many companies saying they plan to recoup their costs through price increases.
• Some companies, like the parent company for Huggies, Kleenex, and Scott toilet tissue, have said that it will be difficult to raise prices if competitors source locally.
• Several businesses have detailed their plans to shift production. Others said they are waiting for more clarity about US trade policy before making any changes.

Tariffs are a hot topic in the boardroom. 

As the first quarter earnings season is in full force, executives have been busy describing how they will handle new import taxes. Several companies plan to recoup their costs by raising prices, but some are worried that they may lose customers. Some companies revealed plans to shift production while others said that they were waiting for clarity on US trade policies.  

“We have factories in … basically in every region of the world. But we don't want to take any measures that's on something that might be temporary,” Nicolas Hieronimus, CEO of the beauty company L’Oreal, said last week, according to a transcript made available by AlphaSense. “So we are watching carefully what's happening and trying to figure out what will be [the] End game.

Companies threatening to raise prices

Price increases are likely at a number of companies, from Procter & Gamble (PG), which makes household goods like Tide, Charmin and Dawn, to Hermès, the France-based luxury goods giant.

American customers will pay more for Hermès’ goods beginning next month, CNBC reported, adding that the price hikes are being used to offset tariffs, and therefore, won’t be occurring in other markets.

Hasbro CEO Chris Cocks said that price increases are inevitable, but must be done with care. Hasbro executives said that about half of its games and toys are made in China. This means that tariffs could reduce the company’s profit by $60 million to as much as $180 million.

We definitely think $9.99 or $19.99 [price points] Cocks added, “It’s important.”

Some companies have warned that raising prices could be risky. Michael Hsu said that some competitors source locally and charging more could make Kimberly-Clark, the parent company of Huggies Kleenex, and Scott toilet tissue, less competitive. Kimberly-Clark, according to Hsu this week, will try to mitigate a $300-million annual tariff hit by shifting its supply chain.

Hsu said, “We’re attempting to be disciplined in our pricing.” He told analysts that consumers are wary, as they’re only “two years removed from an inflation supercycle.”

Firms Take time to Plan Manufacturing Moves

Some businesses have plans in mind. Hyundai executives announced this week that they plan to move production of the Tucson compact SUV. The executives said that vehicles currently made in Mexico for the US market could be built in Alabama while the Mexican plant produces cars for the Canadian markets.

This month, Lakeland Industries, a protective clothing manufacturer, announced a similar strategy for the production “turnout gear” worn by firefighters.

Many companies are eagerly awaiting the trade policies that President Donald Trump’s Administration will implement. Trump delayed the implementation deficit-based tariffs to July, saying that he wanted to give countries time for negotiations with his team. He has also expressed his desire to reach a deal with China, who charges a tax of more than 100% on American imports as a response to a similar high duty on their exports to the US.

Flexsteel Industries’ (FLXS) CEO Derek Schmidt revealed this week that the company is evaluating supply chain adjustments based on changes in trade policy. It has also imposed “modest surcharges” on products imported from Vietnam that account for 55% the company’s revenue.

Schmidt said, “We’ve started more aggressively to search for potential suppliers in other countries.” “I think we can optimize our supply chain fairly quickly as soon as we get more clarity on the direction of trade policy and tariff discussions.”

Executives See Sales Rising—and Stalling 

Tariffs already have a significant impact on sales, both positively and negatively. 

Boeing (BA), the domestic aircraft manufacturer, said that it was unlikely to ship 50 aircraft as planned to Chinese customers this year. Kelly Ortberg, CEO of Boeing, said that clients will not accept the planes due to the retaliatory duties on American goods. Boeing is looking for ways to market these planes to other companies, he said.

Ortberg said, “It’s a sad situation, but many of our customers want deliveries soon, so we will redirect the supply.”

Whirlpool (WHR), a US-based appliance company, told analysts in a recent interview that tariffs in the long run will help it compete against businesses that manufacture in Asia. Demand is already increasing at Kaiser Aluminum, a Tennessee-based company which makes aluminum products for car companies, packages and other clients.

CEO Keith Harvey said that the business started to move in our direction, where it had historically been going to imports or other things.