5 Ways Global Companies Are Navigating U.S. Tariff Uncertainty
Written by
Marc Guberti
Edited by
Rebekah Evans
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Tariffs have created a lot of volatility and uncertainty in the supply chain. While these conditions aren’t ideal for global companies, they have to adapt in order to remain competitive and gain market share. Seeing how these companies plan to adapt can give small business owners some ideas.
It’s also good for consumers to monitor how companies are navigating U.S. tariffs to assess how much prices will go up.
Local Manufacturing
Some corporations are investing in local manufacturing to counter-tariffs. Any goods produced within the United States don’t get tariffed and that’s a detail automakers have noticed. Ford and General Motors are some of the corporations that are shifting production back to the United States to avoid tariffs. These investments will help automobile companies produce more affordable vehicles in the long run, as higher tariffs make it more difficult for them to operate with global suppliers.
Supplier Negotiations
One of the arguments that has stemmed from tariffs is who will have to pay the additional cost. Although corporations are required to pay tariffs, many of them are offsetting costs on consumers. However, President Trump has urged companies to eat the costs and he specifically called out Walmart. In a post on Truth Social, he told the retailer to “eat the tariffs” and mentioned that the company made billions of dollars last year.
Walmart has been raising prices on its products in response to tariffs, but it’s also asking suppliers to pay their fair share. The global retailer has been asking suppliers — especially Chinese suppliers — to lower their prices to minimize the impact of tariffs. Walmart has a lot of leverage in these negotiations due to its sprawling retail presence and its growing e-commerce platform.
Diversifying Logistics
Some corporations are shifting away from China and focusing on countries that have more generous tariff rates. India, Vietnam and other parts of Southeast Asia have seen booming demand as corporations look for better deals. These diversified logistics will make global commerce more competitive and can reduce the prices of various products and services.
Cost-Cutting Measures
Higher prices will scare away some consumers and it has already triggered some layoffs. Although tariffs aren’t entirely to blame, some big tech companies, automakers and entertainment studios have announced layoffs. These job cuts can help companies preserve their profit margins amid tumultuous times.
It’s also possible that corporations reduce their ad spend if the economy slows. Recent earnings reports from Alphabet and Meta Platforms contradict this possibility, but if the tariffs continue, the impact can eventually spill over into the advertising industry.
Raising Product Prices
One of the most common responses to tariffs has been higher prices. Corporations have to raise prices to offset losses from tariffs and many small businesses have also resorted to this measure. Although higher prices can dissuade customers from doing business with them, corporations have to raise their prices to maintain profit margins.
A negative profit margin means you won’t stay in business for long, even if the corporation is worth billions of dollars. Going back to Walmart, it’s true that the company makes billions of dollars in net profit every quarter. However, Walmart’s net profit margin hovers just below 3%. This low-profit margin means Walmart has to raise prices to remain profitable amid higher tariff rates.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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