How Tariffs Can Impact the Global Market and Economies?

The global market is overwhelmed these days following the tariffs talks by the President of the United States, Donald Trump. Global trade is the lifeline of economies, powering competition, innovation, and economic growth. However, significant tariffs or duties can derail the purpose by disrupting global supply chains.

Notably, Trump has signed executive orders on reciprocal tariffs and they will most likely roll out on April 1, 2025. Countries that are viewing it as a potential issue for their supply chain disruptions have also swung into action to levy counter-tax, and several industries have turned into combat mode, ensuring minimal impact on their businesses. 

Overview of the 2025 Tariffs

The primary targets of the increased tariffs are China, Europe, and Northern American nations, leading to trade disruption on a global market. The key policies include:

1. 25% Tariffs on Imports from Canada and Mexico

• Targets automobiles, fresh produce, and crude oil.
• Could increase prices for US consumers and disrupt trade relations with neighboring countries
• Initially delayed until March 2025, Mexico and Canada agreed to strengthen border security measures

2. 10% Tariffs on Chinese Goods

• Focuses on electronics, textiles, and machinery
• Expected to increase costs for US tech manufacturers and retailers that rely on Chinese components
• May accelerate the shift of supply chains away from China to Southeast Asian countries

3. Tariffs on EU and BRICS Nations

• The US is considering tariffs on Germany, France, India, Brazil, and South Africa
• This move could provoke retaliatory tariffs, leading to a broader trade war

4. Potential Economic Impact

• Higher costs for businesses that rely on imports
• Rising inflation as companies pass additional costs onto consumers
• Trade tensions are escalating, affecting global supply chains and international relations

Impact of Restored Tariffs on US Steel and Aluminum Import

February 10 2025 was the day when US President Trump restored taxes on aluminium and steel, hiking them by 25% and 10% respectively while pulling out of nation-centric exemptions, dated March 12, 2025.

The move is in response to rising national security threats following the imports, particularly from China.

Impact of Tariffs on Different Industries and Their Responses

Walmart’s Response to Tariffs:

1. Price Adjustments: As per Walmart’s CFO Brett Biggs, tariffs on Chinese imports will lead to increase in goods’ prices for consumers across different product categories. Despite this, Walmart remains committed to being the low-price leader while managing pricing and margins.

2. Supply Chain Management: Walmart is ensuring no dependency remains on taxed imports goods. Thus, the retail giant is proactively exploring alternate sources and renegotiating with suppliers to reduce cost increment. The company also highlighted the impact tariffs inflicted on personal care items, furniture, and food.

3. Consumer Communication: Walmart is proactively informing consumers about potential price increases to maintain trust and loyalty.

Amazon’s Response to Tariffs:

1. Pricing Strategies: Amazon is acknowledging the challenge of maintaining current prices as the byproduct of new tariffs. It is expected that the company will transfer the burden of price hike onto consumers.

2. Sourcing Alternatives: Amazon is diversifying its supply chain by seeking production in countries with lower or no tariffs, such as Vietnam and Mexico, to mitigate tariffs impacts.

3. Innovative Logistics & Technology: Amazon is putting in work to enhance the logistics network and hence investing in technology for inventory management systems, and automation for cost control while improving efficiency as per the market conditions.

Stanley Black & Decker’s Strategies 

Stanley Black & Decker is realigning its supply chain strategy to address the increased costs resulting from tariffs on goods imported from China, which were imposed following President Donald Trump’s recent trade actions, as disclosed during the company’s Q4 earnings call on Thursday. The company anticipates a financial impact ranging between $10 million and $20 million in 2025, assuming the 10% tariffs on Chinese imports remain in effect. However, according to CFO and EVP Pat Hallinan, this impact would be approximately ten times greater if not for the company’s mitigation efforts.

Macy’s Strategies Against Tariffs 

Macy’s CEO has indicated the price hike in different product categories ranging from household goods to clothing brands, affecting national and private brands. Additionally, Macy’s is exploring alternative sourcing options and renegotiating supplier contracts to reduce dependence on Chinese imports and mitigate cost increases.

BMW’s 

BMW AG has actively lobbied the US government against auto tariffs, citing its $9 billion investment in the Spartanburg, South Carolina plant, which supports over 120,000 American jobs. In response to a 40% tariff on SUVs exported to China, BMW plans to increase production in China and raise prices on U.S.-made vehicles sold there. Despite potential tariffs on Mexican goods, the company proceeded with the opening of a $1 billion plant in San Luis Potosi, Mexico, emphasizing its long-term commitment to North American manufacturing.

Hyundai

Concerns Over Tariffs: Hyundai expressed that US tariffs on auto imports would be “devastating” for the company and jeopardize its expansion plans within the US market. The automaker warned that weakening its position could inadvertently undermine US efforts related to North Korea’s nuclear ambitions.

General Motors (GM)

Warnings About Job Losses: GM issued strong warnings to the Trump administration regarding potential job losses and reduced operations in the US if broad tariffs were applied to imported vehicles and parts. The company emphasized that increased tariffs could lead to a smaller GM and a diminished presence in the domestic market.

Ralph Lauren

Sourcing Diversification: The brand has ensured proactive steps by diversifying its sourcing strategies in anticipation of potential tariff impacts. The approach aims to diminish risks related to reliance on specific countries for manufacturing.

Puma

Flexible Production Strategies: Puma’s CEO reflected on the preparation by the company to move production volumes swiftly to other nations following the tariff hike in certain regions. The company is following the s strategy to navigate changing trade policies effectively.

Ikea

Long-Term Planning: Ikea’s leadership emphasized a focus on long-term investment cycles rather than short-term tariff impacts. The CEO stated that their strategic direction remains clear despite political uncertainties surrounding trade policies.

Siemens Energy

Siemens Energy recently reported challenges due to escalating tariff threats from the US, particularly regarding steel and aluminum tariffs set at 25%.

Executives are scrambling to offset these costs while maintaining competitive pricing in their offerings. The company exemplifies how industrial firms are grappling with increased material costs and adjusting their operational strategies accordingly.

International Responses on Tariffs

India’s Strategy

India has taken proactive steps to subside the reciprocal tariff by announcing plans to reduce taxes on imports to strengthen India’s position in global trade. The country aims to remain competitive and attract foreign investment while mitigating the impact of US trade policies by rationalizing tariffs on key imports.

European Union’s Stance

After Trump’s announcement, the European Union has opposed the tariff increase. Furthermore, the EU has decided to respond against any barriers creating hurdles to free trade. It has weighed down on the fact that 70 percent of imported goods have no customs duties in the EU.

Economic Impact of Trump’s Tariffs

1. Global Economic Slowdown:

• Analysts predict that Trump’s tariffs could dampen global economic growth. The European Central Bank has warned that a trade war could have an “extremely negative impact” on growth prospects worldwide.
• A study by the Peterson Institute for International Economics estimates that tariffs on Canada, Mexico, and China could cost the typical US household over $1,200 annually.

2. Impact on GDP:

• The Tax Foundation’s General Equilibrium Model projects that tariffs on Canada and Mexico could reduce US GDP by approximately 0.3%, while tariffs on China may decrease GDP by 0.1%.
• The cumulative effect of these tariffs could lead to a long-run reduction in economic output by up to 1.3% if proposed tariffs are fully implemented.

3. Job Losses:

• The same model estimates that full-time equivalent employment could decline by 269,000 jobs due to tariffs on Canada and Mexico, and by 73,000 jobs related to tariffs on China.
• Retaliatory tariffs imposed by other countries could exacerbate job losses in the US, with estimates suggesting additional reductions in employment.

4. Inflationary Pressures:

• Tariffs will give rise to prices as following the increase in import costs, resulting in inflation. The average tariff rate on imports could triple from approximately 2.5% to over 7%.

5. Sector-Specific Impacts:

• Automotive manufacturers are under the scanner following  their dependency on international supply chains. Companies like Volkswagen and Ford have expressed concerns regarding margin declines due to increased costs associated with tariffs.
• The semiconductor industry is also bracing for impacts, given its complex supply chains that involve factories in Mexico and China.

6. Price Increases:

The current tariffs dictate that it can potentially fuel the products made from aluminum and steel to go high. Moreover, costs of vehicle manufacturing may shoot up by $ 1000.

7. Agricultural Sector: 

Tariffs on agricultural products, such as grains, meat, and dairy, could disrupt the food supply chain, increasing costs for both producers and consumers, and potentially leading to food shortages in certain markets.

Countries Affected the Most by Tariff Hike

The economic fallout from Trump’s tariffs is expected to vary significantly across countries:

• Canada and Mexico: Both nations are here to bear the severe brunt following their high trade dependence on the US. As per estimates, GDP losses of around 1.15 percentage points for Canada and over 3 percentage points with retaliatory measures are on the cards.
• China: The country’s economy may see trouble in exporting goods and products to the US and China’s economy could see significant disruptions, particularly in its export sectors.
• Developing Economies: Countries like India, Brazil, Vietnam, and other Southeast Asian nations may experience heightened vulnerabilities due to existing tariff disparities with the US, impacting their exports significantly.

Opportunities for Innovation

While tariffs seem to scare economies and companies, with challenges they also offers opportunities to innovate and rethink the following:

• New ways of production for sustainable business models
• Allowing companies to rethink their supply chains
• Diversified sourcing strategies can be developed, providing growth to emerging economies
• Chance to invest in new manufacturing technologies and sustainable materials to stay in the competition
• Manufacturers can invest heavily in robotics and automated systems to reduce labor costs expected to rise due to the impact of tariffs
• Logistics can be smoothened  by AI-driven supply chain management and predictive analytics, to ensure smoother operations despite changing global conditions

Conclusion 

The reciprocal tariffs by President Trump may help the United States strengthen its economy by helping domestic manufacturers and industries, but it can also stir the global trade supply chain and different industries. The costs of several products may go high, and sectors like retail and automotive may witness job losses. Additionally, relations among nations can get strained following the pricing competition, and the world can see retaliatory measures to counter the impact. However, companies like Coca-Cola, BMW, Hyundai, and those operating in China have already escalated preventive measures to minimize the impact on their production costs. However, the long-term implications and benefits will be known after the tariff scheme and its international responses and domestic adaptation strategies are rolled out.