North American companies brace for fallout from Trump tariffs (updated)

Church & Dwight

02/02/2025 17:58

(Adds comments from equipment supplier association in
paragraphs 12-13)
    By Siddharth Cavale
       Feb 2 (Reuters) - For North American companies, the
"wait and see" moment on tariffs is over. 
    U.S. President Donald Trump imposed a 25% levy on goods from
Canada and Mexico, along with a 10% tariff on China, in what
could be the opening stages of a full-scale trade war likely to
create new headaches for executives that have been wrangling
with higher costs for several years.
    Tariffs on goods imported from the U.S.'s three largest
trade partners could upend industries from autos to consumer
goods to energy. Executives have been able to deflect questions
about dealing with tariffs before Saturday's announcement, and
many wanted to avoid antagonizing Trump's White House after he
took office. That non-response may no longer be possible.
    "All CEOs are bewildered by these non-strategic tariff
tantrums being directed at our closest allies instead of
adversaries," said Jeffrey Sonnenfeld, professor at Yale School
of Management in New Haven, Conn.
    Numerous global companies will report results this coming
week, including Amazon  AMZN.O , Ford Motor  F.N , Mondelez
International  MDLZ.O  and Owens-Illinois  OI.N . They will
likely face a barrage of questions on how they plan to mitigate
these costs.
    Reuters reached out to numerous companies, none of whom
would comment on the record about the tariffs. Several industry
associations did comment, though some were more critical than
others.
    The U.S. Steelworkers union, the largest industrial union in
North America, criticized Trump's tariffs on Canada, citing some
$1.3 trillion in trade between the two countries. 
    "These tariffs don't just hurt Canada. They threaten the
stability of industries on both sides of the border," union
president David McCall said in a statement.
    
    FOREIGN FACTORIES    
    Automakers like General Motors  GM.N  and Toyota  7203.T ,
could shift production from foreign factories to the United
States, while companies like global aluminum giant Alcoa  AA.N 
have suggested re-routing shipments to reduce the tariff burden.
    Many companies accelerated shipments in the fourth quarter
ahead of Trump's return to office.
    Offsetting tariffs is harder for smaller companies without
global operations that need foreign parts. Numerous aerospace
and auto companies operate near the U.S.-Canada border, while
U.S. refiners in the Midwest rely heavily on Canadian crude oil.
    Collin Shaw, president of MEMA Original Equipment Suppliers,
which represents more than 500 auto suppliers, said in a Sunday
interview that tariffs could introduce substantial delays into
the production process. 
    "Even if (something) like a transmission is finally
assembled in the United States, it's sourcing products from all
three countries," Shaw said. "A hiccup in just one of those not
only will shut down a major component, like a transmission or an
interior, but then you can't build the rest of the vehicle." 
    Tariffs are paid by importing companies, not foreign
nations, as Trump frequently claims erroneously. This week, he
acknowledged that tariffs would cause short-term disruption as
the costs are sometimes passed on to consumers. 
    Trump has pursued tariffs as a way of forcing companies to
relocate to the United States. But that is frustrating to firms
that shifted production to Canada and Mexico in response to
Trump's tariffs on China in his first term - and now are set to
be hit even after "nearshoring" closer to home.
    
    CHECKOUT PRICES 
    "Our American automakers ... should not have their
competitiveness undermined by tariffs that will raise the cost
of building vehicles in the United States and stymie investment
in the American workforce," said Matt Blunt, president of the
American Automotive Policy Council, which represents Ford Motor,
General Motors and Stellantis  STLAM.MI .
    Research shows that higher tariffs usually lead to higher
checkout prices, but the exact effect is unclear. Experts told
Reuters that businesses might absorb some or all of the tax
burden.
    Tom Madrecki, vice president of supply chain resiliency at
the Consumer Brands Association, said in a statement: "The
consumer packaged goods industry supports a strategic 'America
First Trade Policy' that protects American jobs and keeps food,
beverage, household and personal care products affordable."
    However, he also said tariffs could cause higher prices and
urged Mexico and Canada to work with President Trump.
    Big-box stores like Walmart  WMT.N  and Target  TGT.N ,
which have been fighting to keep prices low because of
inflation, might not be able to withstand higher supply chain
costs.
    The two companies did not immediately respond to requests
for comment, but the National Retail Federation, which
represents the nation's largest retailers, said the White House
should explore other ways to achieve its policy goals.
    “As long as these universal tariffs are in place, Americans
will be forced to pay higher prices on everyday consumer goods,"
said David French, NRF executive vice president of government
relations.
    Church & Dwight  CHD.N , which makes Arm & Hammer detergent
and Trojan condoms, said it would focus on local manufacturing
and productivity improvements to offset the effects. 
    "These are volatile situations, so we'll see how long it
lasts and what happens," CFO Rick Dierker said in an earnings
call on Friday, adding that they have the ability to "be
reactive when we need to be."

 (Reporting by Siddharth Cavale; Additional reporting by Kalea
Hall and Nora Eckert in Detroit and Andrea Shalal in Washington;
Writing by David Gaffen; Editing by Christopher Cushing and
David Holmes)
 ((david.gaffen@thomsonreuters.com; +1-646-223-6064; Reuters
Messaging: david.gaffen.reuters.com@reuters.net))