- Donald Trump pledged to enforce a 10% blanket tariff on all imported goods to the US.
- It is months before Trump’s inauguration, but tariffs are already on the lips of global business leaders.
- This is what executives from Ralph Lauren, BMW, Airbus, Ikea, and others have said so far.
As soon as Donald Trump won reelection, CEOs worldwide discussed his plans for a new era of global tariffs.
Although inauguration day is two months away, the leaders of consumer giants like BMW, Ikea, Airbus, and Ralph Lauren were asked about the plans by the press and on earnings calls this week.
Trump has vowed to impose a 10% blanket tariff on all foreign goods entering the US and up to 60% and 100% on goods imported from China and Mexico, respectively.
He also floated a 100% tariff on imported vehicles and said he’d impose a 200% tariff on machinery giant John Deere if it continued with plans to move some production to Mexico.
Asia
During Trump’s first term, the US and China imposed billions of dollars worth of tariffs against each other. Now, the potential for renewed trade disputes has concerned some Asian business leaders. Chinese stocks dropped after news of Trump’s election victory.
Shinji Aoyama, global executive vice president at Japan’s Honda Motors, said on a Wednesday earnings call that possible tariffs on Mexico would have a big impact on Japanese companies. Honda has multiple production plants in Mexico.
“If the tariff is a permanent one — I suppose it could be not permanent — maybe we would go for the production elsewhere, which is not subjected to the US tariff that we could do it.”
Aoyama said that he did not expect tariffs to be imposed soon, but added that it would not be easy to stop production quickly in Mexico.
“Whoever the president could be, we should not be too much swayed around by them,” said Aoyama.
Piyush Gupta, CEO of Singapore’s top bank, DBS, said during a media briefing on Thursday that he found it hard to believe Trump would follow through with his proposed tariffs.
“The better thing to do is to wait and see what policy they actually come up with. It’s very hard to make projections at this point in time,” said Gupta.
Instead, he highlighted the impact Trump’s policies could have on Fed rate cuts. Fewer rate cuts would boost net interest margin — a key metric for banks.
“I think a higher interest rate environment is generally better for DBS,” Gupta said.
He added that DBS would be focusing on the legal and regulatory risks associated with the Trump administration.
“They could come up with different kinds of sanctions and other policies — you have to be on top of that.”
Europe
Trump has repeatedly said he sees the European Union’s trade policies as unfair.
During his first term, he imposed a number of tariffs on key European industries, including steel, aluminum, and certain luxury goods. Europe responded in turn with tariffs on goods including bourbon whiskey, Harley-Davidson motorbikes, and Levi’s.
The US is Europe’s top trading partner, leaving its businesses highly vulnerable to Trump’s proposed 10% tariff.
Sectors like automobiles, pharmaceuticals, and chemical products, which represent the lion’s share of European exports to the US, would likely experience the biggest economic hit.
Shares in BMW, Mercedes, and Volkswagen all fell in response to Trump’s victory. The US is by far Germany’s largest export market, with goods worth $170 billion sent in 2023, per Germany’s statistical authority.
On Wednesday, Oliver Zipse, chairman of BMW, downplayed fears over tariffs during a third-quarter earnings call, citing the company’s large US business.
“We have a strong footprint there, which kind of protects us against anything which might happen on the geopolitical side,” he told analysts.
Zipse also told reporters, per Reuters, that BMW “shouldn’t be too nervous about what might happen.”
Arne Freundt, CEO of German sports brand Puma, took a similarly relaxed attitude to potential tariffs. “We can shift volumes to other countries swiftly in case of tariffs increase in certain countries,” Freundt said.
“Politics is politics,” Ikea’s CEO, Jesper Brodin, told Business Insider when asked about how Trump’s tariffs would affect international business.
“So we work with longer term cycles and investment frames, and so on. In Ikea, we are very clear on our direction.”
Guillaume Faury, CEO of the airline Airbus, was more concerned about how tariffs may impact prices.
Addressing Trump’s proposed tariffs during Airbus’ third-quarter earnings call the day before the election, Faury warned that the cost of any new tariffs would be passed along to Airbus’s airline customers, as in 2020.
“We don’t believe that’s helping aviation and the competitiveness of the airlines and the aviation industry, but it’s something we would be able to manage,” Faury said.
During his first term, Trump and the European Union were locked in a long-running dispute over aircraft subsidies, which the US said put Boeing at a disadvantage, and 15% tariffs were imposed on aircraft imported from the EU.
Soon after Trump’s departure from the White House, the two sides ended their dispute and axed the tariffs, but renewed tariffs could lead to issues once again.
Martin Sorrell, executive chairman of the UK-based advertising company S4 Capital, described the President-elect as “good news” for North American businesses and companies during an earnings call on Thursday.
“Whilst US business doesn’t like to talk about it, basically US businesses wanted to see a Trump administration because it means low tax and low regulation,” Sorrell said.
He added that Europe would be more challenged because of the threat of tariffs.
USA
While tariffs are intended to protect domestic industries by making imports more expensive, companies whose supply chains include foreign contractors could see their costs rise.
Justin Picicci, Ralph Lauren’s CFO, said that over the last seven-plus years, the fashion brand has diversified its sourcing and developed alternative production for its key products.
“Our global sourcing and supply chain is agile and well-positioned,” Picicci said during an earnings call Thursday.
“So we’ll wait and see what, if any, future policy ultimately gets passed. But we’ve navigated tariffs successfully before, including not so long ago,” Picicci said.
The costs of tariffs are often passed onto the consumer in the form of price rises. But as demand for domestic goods increases, consumers see higher prices across the board.
Timothy Boyle, chief executive of Columbia Sportswear, said in an interview with The Washington Post published on October 30 that the brand was set to raise prices if tariffs were imposed.
“It’s going to be very, very difficult to keep products affordable for Americans,” he said.