International businesses are feeling the heat as US tariffs lead to rising costs and strained trade relationships. Despite a brief pause intended to allow negotiations, companies are now raising prices to cope with the potential impact of higher tariffs coming into effect.
According to a global survey by Allianz Trade released on Tuesday, over half of the surveyed companies in the United States plan to increase prices on their products, ultimately passing the costs onto American consumers. This development comes as the 90-day pause on “reciprocal tariffs” is set to expire on August 14, unless extended further.
Retail giant Walmart recently announced it cannot absorb all the costs associated with the tariffs, hinting at potential price hikes for shoppers. Allianz Trade noted that “few companies intend to absorb increased costs or cut export prices to maintain market share,” with 42% of exporting companies anticipating a decline in turnover.
For small and medium-sized businesses, navigating the operational challenges and increased expenses resulting from tariffs has become a pressing concern. In a recent article by Time, a business owner who sells compostable bin bags, baby wipes, and diaper bags on Amazon in the US and UK shared, “The uncertainty makes doing business very difficult.”
In an unintended boomerang effect, the policy designed by the Trump administration to bolster the United States’ competitive advantage is prompting businesses to seek favorable partnerships elsewhere. Europe and Latin America are emerging as attractive alternatives for Chinese firms. Françoise Huang, senior economist for the Asia Pacific at Allianz Trade, stated, “European companies are increasingly interested in exporting to China and Asia.”
Meanwhile, China witnessed a near 300% surge in container bookings for China-US routes in the days following the announcement of the tariff pause, as reported by Time. This indicates a rush to ship goods before potential tariffs take effect.
The shifting dynamics highlight how trade policies can have far-reaching and sometimes unintended consequences, affecting businesses and consumers worldwide.
