The majority of US companies say prices need to be raised to meet Donald Trump’s tariffs in the US, according to the new report.
Over half (54%) of US companies surveyed by insurance company Allianz said prices need to be raised to accommodate the costs of tariffs. Of the 4,500 companies in nine countries surveyed by Allianz, including the US, the UK and China, only 22% said they could absorb the increase in costs.
The unpredictability of US trade policies also undermines exporters’ trust. The survey found that when Trump announced his tariff policies, he was expected to see sales fall by -2% to -10% over the next 12 months, compared to under 5% before the April 2nd “liberation date.”
Trump has pulled back many of the taxes he originally proposed, but major duties are maintained, including a 10% universal tariff on all US imports, a 30% tariff on Chinese imports, and additional tariffs on certain industries such as metal parts and auto parts.
Trump has argued that tariffs will make America “very rich,” but it appears that American businesses and consumers are expecting to pay higher prices as tariffs become more entrenched. In April, consumer expectations for inflation reached their highest point since 1981, according to the University of Michigan Institute of Social Studies.
Instead of quickly raising prices that could thwart customers, many companies have spent months trying to get ahead of Trump’s tariffs by stockpiling products to temporarily avoid them.
Eight of the 10 American companies said they put their shipments to China on the front line before Trump announced his tariffs, with 25% saying they launched Front Road before the November 2024 election.
Inflation data for April showed that US price increases remained near the level of the month. Economists say it will take some time for tariff-related price increases to appear in the data, and businesses are beginning to say they will hand over some of the tariff costs to consumers.
“Given the magnitude of the tariffs, even the levels announced this week, we can’t absorb all the pressure,” Walmart CEO Doug McMillion said in a revenue call last week. “The higher the tariff, the higher the price.”
Toymaker Mattel also said it would need to raise prices and would continue to manufacture products outside of the US.
The majority of companies (60%) in the report expect tariffs to have a negative impact on businesses, and say they expect exports to grow aggressively this year, down from 80%, who said the same thing at the beginning of the year.
Many companies are on the verge of rising prices, relying on stockpiled stocks and hoping to reach trade deals soon, but if the trade war continues, companies will need to raise prices in the summer.
“Monthly business research … shows that businesses will ultimately take over the majority of the tariff increase by summer,” said Maxine Darmet, senior economist at Allianz Trade.
