The retailer’s executives huddled sitting on sofas in a greenroom next to the stage where they would meet with their biggest investors on Tuesday. They needed to review Target’s plans. The company had created a leadership task force a few months earlier—when Trump was victorious in the presidential election—to prepare for various trade scenarios. Now the executives knew more about what they were facing.
The U.S. imposed 25% tariffs on goods imported from Mexico and Canada, as well as an additional 10% tariff on Chinese imports on top of an extra 10% levy it placed on Chinese products last month. The tariffs will drive up the costs of fruits, smartphones and many more items that fill shelves at Target stores. Target has already moved production of many of its nonfood store brand goods out of China. But Cornell said retailers would have to increase prices within days on fresh foods, such as avocados and other produce grown in Mexico and shipped quickly to the U.S.
“Those price increases, if they stay in place,” Cornell told investors Tuesday, they “would hit the consumer pretty quickly.”
Trump’s trade war reverberated through corner offices and conferences around the country on Tuesday, from Target’s meeting with Wall Street investors and a gathering of farmers in Denver to a conference of shipping executives in Los Angeles. China, Canada and Mexico said they would respond with tariffs on U.S. exports, including on American soybeans, chicken and pork.
America’s companies have been preparing for the potential move, even as some business leaders thought the threats were mostly bluster and brinkmanship. Many raced in recent months to stockpile goods, hoping to cushion any blow or ride out tariffs if they prove a temporary bargaining measure. Others have used the uncertainty to push through price increases or lobby Trump officials to spare them by promising to invest in U.S. factories.
“The story hasn’t fully played out yet,” said Chris Cocks, chief executive officer of the toy maker Hasbro, which sells Nerf guns, G.I. Joes and the Monopoly board game. “Our first rule, though, is don’t overreact.”
About 40% of Hasbro’s U.S. sales come from Chinese-made toys, a number the company plans to cut in half over the next four years. In the meantime, if the new tariffs on Chinese goods stay in place, Hasbro has to consider raising some prices, Cocks added.
U.S. stock markets have tumbled, and lumber prices have jumped. U.S. corn and wheat prices have dropped as China enacted retaliatory tariffs. Shares of Best Buy slumped 13% on Tuesday after Chief Executive Corie Barry told investors that China and Mexico are two of the retailer’s biggest suppliers of electronics and components, “making price increases for American consumers highly likely.” Shares of Boeing, America’s biggest exporter, fell on fears that it would be swept up in a global spat.
Several business leaders said they would be watching closely for the tariffs’ impact on hiring. The U.S. job market has cooled but continues to add jobs, which is vital to consumer spending and business expansion.
“That is critical, and we don’t really yet know how these things will be rolled out and how they’re going to be used,” JPMorganChase Chief Executive Jamie Dimon said Tuesday on the sidelines of a workforce-development event hosted by the bank in New York.
Automakers are among the most exposed because they have factories and suppliers spread across North America. Vehicles and auto parts could be hit several times as they work their way through the manufacturing process. The tariffs could add as much as $10,000 to the cost of some pickup truck models sold in the U.S., analysts estimate. Shares of General Motors and Ford Motor fell in Tuesday trading.
Bob Roth, executive chairman of a Michigan auto-parts supplier, went to bed Monday night worried that the 25% tariffs set to take effect while he slept could prompt Canada to retaliate. By the time he woke up, that had already happened.
Roth’s company in Grand Rapids, RoMan Manufacturing, makes components for the giant robots that weld together car panels in vehicle-assembly plants. Some of his biggest customers are in Canada, and Roth worries that they could switch to suppliers in Europe or Japan to avoid paying the tariff.
“These are great customers that have been with us for almost 50 years, but they’d be foolish not to look to the Europeans,” he said. “Because I guarantee you there will not be tariffs between the EU and Canada.”
Roth said his management team won’t take any major actions this week, but will assess the fallout. The company has a strong balance sheet, which has helped it weather past tough times in the cyclical auto business, he said.
“That lets us take a gut punch,” he says. “And we’re prepared for one.”
Farmers at an agriculture conference in Colorado debated the impact, with some speculating that tariffs would be lifted quickly. Others, including Barry Evans, who farms sorghum on 5,000 acres in Texas, expressed hope that Trump would dole out billions of dollars in aid as he did during his first term “to help farmers who stuck with him during the tough times.”
“It’s going to be hard on farmers, and we’re definitely seeing that now,” he said.
At this week’s annual gathering of the biggest shipping companies in Long Beach, Calif., shipping executives, insurance brokers and freight forwarders said it would be tough to complete any deals.
“Before lunch we were talking to customers on the basis of a 10% tariff, and after lunch it was 20%,” said Nils Haupt, a spokesman for the German containership operator Hapag-Lloyd, referring to the levies on China. He added that customers are exasperated by the unpredictability.
Many manufacturers are trying to diversify away from China to factories in India, Indonesia, Vietnam and Turkey, said Soren Toft, chief executive of Mediterranean Shipping. “What we are not hearing is, ‘I brought my production back to Kentucky.’”
In the U.S., home-construction costs are projected to increase $1.7 billion annually, according to the National Association of Home Builders, partly because builders rely heavily on North American imports. More than 70% of U.S. builders’ lumber and gypsum products, such as drywall, come from Canada and Mexico, respectively.
If the tariffs are a bargaining tactic that are in place for only a few weeks, the biggest home builders might be able to absorb the costs, but smaller ones will almost certainly feel the squeeze more immediately. In a matter of months, even big builders will need to increase rents for newly built apartments or raise the selling prices on new houses. In some cases, builders will pause projects or abandon them entirely.
“There are only two ways to manage higher costs, and both are bad for the consumer,” said Adam Wolfson, chief executive of Wolfson BTR, a Florida-based build-to-rent home developer.
At the Inspired Home Show in Chicago, some vendors displayed prominent signs advertising that their products weren’t affected by the new tariffs.
Brian Horowitz, chief executive of Creative Wagons, an outdoor-goods company, posted a “No Tariff” sign outside his booth. Some 90% of his company’s products are made in Vietnam after he shifted production from China four years ago.
“Vietnam has been the best thing I’ve ever done,” said Horowitz, citing stronger intellectual-property protections and a quicker time to market. The sign, he added, was helping land new customers.
Rob Kay, chief executive of Lifetime Brands, said the kitchen and home goods company started stockpiling more inventory of products such as S’well water bottles, Farberware pots and pans, and KitchenAid knives in October, spending tens of millions of dollars to do so.
“We started building this war chest,” Kay said, adding the company has enough pretariff goods to last into the second half of the year.
Write to Sarah Nassauer at [email protected], Roshan Fernandez at [email protected] and Rebecca Picciotto at [email protected]
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