Trade trouble

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Consumer-oriented companies face a catch-22 in their response to tariffs. Those that compete on price, such as Walmart, will likely have to absorb the cost of levies, which will cut into their margins. But companies that pass costs onto consumers, as Apple has indicated it will do, risk dampening demand for their products. Invesco’s Hooper pointed to washing machines as an example. Tariffs on steel and aluminum caused Whirlpool Corp to raise prices on its appliances, and its second-quarter earnings slumped as a result. To be sure, consumer electronics are flashier products than a washer-dryer set. And U.S. tech companies can skirt some tariffs by shipping Chinese-made parts directly to other countries for assembly and then importing the finished items into the United States, said Scott Yuschak, equity strategy analyst at SunTrust Advisory Services in Atlanta. The list of targeted items in the next round of tariffs excludes cell phones, for instance.

Tariffs threaten market-leading tech, consumer stocks | Reuters

But the trade war is more than just tariffs. Trump’s actions might reduce consumer confidence, undercut business investment, and reduce investors’ appetite for risk. Companies anticipating more tariffs and export barriers, for instance, might choose not to expand their operations in the United States.

The Costs of Trump’s Trade War - The Atlantic