U.S. President Donald Trump’s abrupt reversal on broad import tariffs did little to ease business concerns over his trade war, with companies still facing rising costs, declining orders, and disrupted supply chains.
In a stunning reversal, the president said on Wednesday he would temporarily lower the hefty tariffs he had just imposed on dozens of countries, though he also hiked duties for China and kept 25% tariffs levied on aluminium, steel and autos in place.
The news sent global stocks soaring on Wednesday after an intense bout of volatility that wiped trillions of dollars off equity markets. Investors hope there will now be time for negotiations to avert a full-blown global trade war.
The European Union said on Thursday it would pause its first countermeasures on about 21 billion euros ($23 billion) of U.S. imports.
Stocks, however, reversed course on Thursday, posting sharp declines.
‘Dynamic And Volatile’
The latest reversal in Trump’s tariff agenda has only added to company executives’ confusion about its objective.
Companies with complex and diverse supply chains spanning multiple countries from China to Germany were already scrambling to work out how they would be affected by duties and grappling with possible price hikes to mitigate tariff risks.
“The developments related to tariffs, whether from the USA or countermeasures by the EU and other countries, are currently extremely dynamic and volatile. We are analyzing the situation internally with great precision and high priority – particularly regarding potential impacts on our procurement and pricing,” German retailer Hugo Boss said in a statement.
Hugo Boss and other companies are questioning what happens after the 90-day pause, especially as the average effective U.S. tariff rate would now be roughly 23% before U.S. firms adjust their imports, Yale economist Ernie Tedeschi said in a post on X.
Those tricky calculations are being made at a time when consumer confidence is waning and worries are growing about a global recession.
“Global trade flows are complex and the (…) conditions for cross-border trade are currently changing rapidly,” German chemicals company BASF said on Thursday.
BASF said the direct impact of U.S. tariffs would be limited due to its high proportion of local production, but added it was difficult to estimate the effects of a trade war on demand for its products and its customers.
Tech giant Apple has chartered cargo flights to ferry 600 tons of iPhones, or as many as 1.5 million, to the U.S. from India.
Analysts have warned that U.S. prices of iPhones could surge, given Apple’s high reliance on imports from China, the main manufacturing hub of the devices, which is now subject to Trump’s highest tariff rate – an eye-watering 125%.
Considerable Uncertainty
“A 90-day pause on tariffs, while framed as a temporary relief, creates considerable uncertainty for businesses,” said Anita Wright, a chartered financial planner at Bolton James.
Trump says he wants to bring back manufacturing to the U.S., but the constantly changing policy makes it risky to invest for the long term, particularly in sectors like green energy.
“The Trump tariffs are putting the brakes on green investment just like they are anything else, but the effects may be particularly acute in this category,” said Matthew Nordan, general partner at Azolla Ventures, an independent venture capital company. “The reason is that we’re talking about physical stuff – industrial infrastructure, things made out of steel, projects with long lead times – where the tariffs present more friction than for services or software companies.”
U.S.-Centric Approach
Some companies, including General Motors, Porsche and Mercedes-Benz, have built up inventory in the U.S. to get ahead of tariffs.
But the uncertainty is dimming the outlook for later this year, trade executives said. Weaker U.S. consumer confidence is already hurting spending on items like sneakers.
According to a weekly sales survey by industry association Footwear Distributors and Retailers of America, in the eleven weeks since Trump’s inauguration, shoe sales in stores are down 9.5% from the same period last year. The association’s members include Nike, Adidas, Skechers, and Walmart.
A spokesperson for Inter IKEA, which makes IKEA products and supplies them to franchisees around the world, said tariffs make it more difficult to keep prices of home furnishings affordable.
“It’s too early to say what level the tariffs will affect the prices of our products, but we are closely monitoring the situation and will continue to evaluate how it evolves,” they said.
Gloomy Outlook
The outlook for earnings season, which kicks off in earnest next week with reports from LVMH, ASML and L’Oreal, is increasingly gloomy.
Volkswagen warned late on Wednesday that first-quarter profits were much weaker than expected and included a charge for the cars it’s sending to the U.S.
Trump’s temporary cuts offer little relief to auto, steel and aluminium companies still incurring 25% U.S. tariffs.
Serbia’s Testeral, which makes aluminium and PVC products for the construction industry, may have to lay off staff if tariffs remain in place, CEO Sanja Stanimirovic told Reuters.
The company cannot easily raise prices to cover the additional cost because it is locked into long-term contracts, she said. The company employs about 120 full-time staff and 80 seasonal or part-time workers.
“This (the tariffs) poses a significant risk to our company at present,” she said.
($1 = 0.9007 euros)
(With inputs from Reuters)
