President Trump’s abrupt shift in tariff policy, which saw a temporary reduction of import duties for many countries while maintaining high tariffs on China and key industries like steel and autos, has left US and multinational corporations struggling with heightened ambiguity and perplexity. Despite a brief market rally following the announcement, CEOs and analysts remain perplexed about the long-term implications and what will transpire after the 90-day pause.
The sudden policy U-turn has exacerbated existing concerns about soaring costs, disrupted supply chains, and dwindling orders, adding to the already volatile trade landscape. Companies with intricate international supply chains, spanning from China to Germany, are struggling to assess the impact of these fluctuating tariffs and the potential need for price adjustments.
For instance, the German retailer Hugo Boss said they were “analysing the situation internally with great precision and high priority – particularly regarding potential impacts on their procurement and pricing.” This statement reflected the industry’s general confusion. According to Yale economist Ernie Tedeschi, the key issue was the post-90-day period since the average effective US tariff rate was still high, at almost 23 per cent. This uncertainty coincided with declining consumer confidence and growing fears of a global recession.
German chemical giant BASF acknowledged the “rapidly changing” conditions for cross-border trade, noting that while the direct impact of US tariffs on their operations is limited due to local production, the broader effects of a trade war on demand are difficult to predict.
Anita Wright, a chartered financial planner at Bolton James, highlighted the “considerable uncertainty” created by the 90-day pause, arguing that the constantly shifting policies discourage long-term investment, particularly in sectors like green energy. Matthew Nordan of Azolla Ventures echoed this, noting that tariffs create more friction for physical infrastructure projects with long lead times.
The Footwear Distributors and Retailers of America reported a 9.5 per cent fall in shoe sales in the eleven weeks since Trump’s inauguration.
The increasing economic instability is anticipated to be reflected in the forthcoming earnings season, which will feature reports from LVMH, ASML, and L’Oreal.
