US tariffs won’t just raise costs for American manufacturers and retailers, but for manufacturers and retailers around the globe. In turn, global brands are prepared to shift these costs to shoppers. ABMT Textiles, Pandora and Birkenstock prepare for inflationary increases. They plan to put these increases into effect as soon as mid-2023. The implications of these tariff increases would be felt internationally, driving up consumer prices and demand across the world.
ABMT Textiles specializes in textile supply chains in Australia, Vietnam, and Bangladesh. They currently export nearly a third of their output to the United States. General Manager Steve Tsondidis said the big concern was the devastating financial toll it could take on the small company. “The biggest worry for me is higher pricing will mean less demand, which means less requirements for product, which will definitely impact on future projections and buying,” he stated.
According to the complaint, Pandora largely outsources its manufacturing production to Thailand. They anticipate that the tariffs will raise their cost to operate by tens of millions of dollars. The jewelry retailer takes a day-to-day approach to the situation and will continue to change prices as needed.
Impacts on Global Supply Chains
Collateral damage from US tariffs aren’t limited to American consumers. Experts say the impacts of these price increases will be felt internationally this June, July, and August. Dan Ives, a well-known analyst, commented on the trickle-down effect of these tariff increases. “As we get into June, July, August, you’re going to see price increases around the world,” he stated.
He focused on just how big these price increases could be. This amendment would still allow prices to increase by 3% to 5% with some products experiencing double digit increases. This wide range of price increases reflects just how complicated global supply chains and pricing decisions can be.
As Stephen Halmarick, chief economist at Jarden, said, “These tariffs have an enormous effect. He cautioned that they would otherwise hurt US consumers and destabilize global demand. Trying to insulate your US demand by putting prices up in other markets might be self-defeating because you might just end up killing your demand everywhere,” he said.
Uncertainty in Pricing Strategies
In the wake of a quickly changing economic climate, businesses are struggling to come up with good pricing strategies. Tsonidis highlighted the struggle many companies face: “It’s very hard to plan at the moment because the goalposts are moving so much … everyone’s scrambling to see what they can do to get around the tariff situation.”
This uncertainty in planning extends to retailers like Pandora, which mentioned that “the extent and timing of further price increases to be determined based on the concrete circumstances.” This lack of clarity makes it extremely difficult for them to adapt quickly to changes in tariffs and overall market conditions.
On the macroeconomic side, the overall effect of the tariff cuts is likely to contribute to inflationary pressures in markets around the world. As Andrew Hauser cautioned, if tariffs cause major disruptions to supply chains, that could lead to economy-wide inflationary impacts. “There are possibilities that if this goes far enough and it impairs global supply chains, that could push inflation up here and everywhere else for a period,” he said.
The Future of Consumer Demand
As firms prepare for these increasing expenses, the effects of inflation on consumer demand are a major worry. Halmarick warned that if price rises are too steep, they might dampen consumer demand. “If they impose all of the price increase on the US consumer, that could do a number of things, which is reduce demand significantly by the US consumer,” he noted.
Retailers have more options than ever, but with this new economy at the fore, retailers are being more judicious in how they pursue….Ivica Krolo recounted how even a modest price increase of low single digits would more than neutralize the effects of tariffs. This simple adjustment is enough to level out the impacts. This finding is a call for smart price increases, where you’re disciplined about price increases, but you’re in-tune to shifts in consumer demand.
