Companies Weigh Price Increases, Manufacturing Moves as Trump Tariffs Hit

Tariffs are the talk of the boardroom. 

With the first-quarter earnings season in full swing, executives have been busy explaining how they’re handling new import taxes. Several businesses plan to recoup costs through price increases, though some worry they’ll lose customers if they charge more. Some companies detailed plans to shift production, while others said they’re waiting for more clarity on US trade policy.  

“We have factories in … basically in every region of the world. But we don’t want to take any measures that’s on something that might be temporary,” Nicolas Hieronimus, CEO of the beauty company L’Oreal, said last week, according to a transcript made available by AlphaSense. “So we are watching carefully what’s happening and trying to figure out what will be [the] end game.”

Companies Poised to Raise Prices

Price increases are likely at a number of companies, from Procter & Gamble (PG), which makes household goods like Tide, Charmin and Dawn, to Hermès, the France-based luxury goods giant.

American customers will pay more for Hermès’ goods beginning next month, CNBC reported, adding that the price hikes are being used to offset tariffs, and therefore, won’t be occurring in other markets.

Hasbro (HAS) CEO Chris Cocks said price increases were unavoidable, but had to be done carefully. About half of Hasbro’s games and toys originate in China, which means tariffs may reduce its profit by $60 million to $180 million this year, executives said this week.

“We definitely think $9.99 and $19.99 [price points] are important,” Cocks said.

Raising prices is risky, some companies said. Michael Hsu, CEO of Kimberly-Clark (KMB), the parent company of Huggies, Kleenex and Scott toilet paper, said some competitors source locally, so charging more may make Kimberly-Clark less competitive. Kimberly-Clark will seek to mitigate a $300 million annual hit from tariffs primarily through supply chain shifts, Hsu said this week.

“We’re trying to be disciplined on price,” Hsu said. He told analysts consumers were wary because they’re “maybe two years removed from what I would call an inflation super cycle.”

Firms Deliberate Over Manufacturing Moves

Some businesses have moves in mind. Hyundai plans to shift production of the Tucson, a compact SUV, executives said this week. US-bound vehicles now made in Mexico could be constructed in Alabama, while the Mexican plant turns out cars for the Canadian market, they said.

Lakeland Industries (LAKE), a protective apparel manufacturer, outlined a similar strategy this month for the production of “turnout gear” used by firefighters.

Many companies are waiting to see what trade policies President Donald Trump’s administration settles on. Trump delayed the implementation of deficit-based tariffs until July, saying he would give countries time to negotiate with his team. He has also expressed the desire to reach an agreement with China, which is charging a more than 100% tax on American imports in response to a similarly high duty on its exports to the US.

Flexsteel Industries (FLXS), an Iowa-based furniture company, is gauging how supply chain adjustments would play out depending on how trade policy evolves, CEO Derek Schmidt said this week. (It has also imposed a “modest” surcharge on products imported from Vietnam, which account for 55% of company revenue.)

“We’ve more aggressively started to seek out potential suppliers in other parts of the world,” Schmidt said. “And as soon as we have more clarity, ultimately, on where the trade policy and tariff discussions go, I think we can move fairly quickly to optimize our supply chain.”

Executives See Sales Rising—and Stalling 

Tariffs are already impacting sales, for better and for worse. 

Boeing (BA), a domestic airplane manufacturer, said it was unlikely to send 50 aircraft to Chinese customers as planned this year. Clients won’t accept the planes because they’re now subject to retaliatory tariffs on American goods, CEO Kelly Ortberg said this week. Boeing is assessing ways to market those planes to others, he said.

“It’s an unfortunate situation, but we have many customers who want near-term deliveries, so we plan to redirect the supply,” Ortberg said.

The US appliance company Whirlpool (WHR) told analysts that, in time, tariffs will help it compete with businesses that manufacture in Asia. And demand is already picking up at Kaiser Aluminum (KALU), a Tennessee-based company that makes aluminum products for packages, car companies and other clients.

“We started to see business start to navigate our way, where historically it may have gone to imports and other things,” CEO Keith Harvey said this week.