US companies are initially passing on increased costs from tariffs to consumers, but experts warn that this may not last. President Donald Trump’s steep levies on imports have led economists to expect American businesses to raise prices to offset the higher costs.
Currently, domestic companies seem to be absorbing the hit, with smaller profit margins or even losses. However, market observers say this could change soon. London-based Deutsche Bank strategist George Saravelos notes that China, a major importer of US goods, is not feeling the full impact of Trump’s trade policy, despite facing an average tariff rate above 30%.
Saravelos’ analysis suggests that American companies will start passing on costs to consumers in the third quarter, with “core” CPI rising at an annual rate of 3.2%. This would lead to “stagflationary” higher prices and limited growth. Companies had warned of price hikes when Trump first announced his tariff plans earlier this year.
While some areas have seen increased prices, others are not as affected. Paul Donovan, chief economist at UBS, notes that US consumers pay 3.6% more on average for appliances compared to March, while counterparts in Europe and other countries face lower price increases.
Businesses feel the impact of tariffs, with companies like Baker Hughes and Conagra Brands reporting significant losses due to increased costs. The situation is fluid, but experts warn that tariff impacts will become prominent in the second half of the year.
Source: https://www.cnbc.com/2025/07/25/inflation-ahead-companies-will-only-absorb-higher-tariff-costs-for-so-long.html