Nearly all companies are taking action to avoid tariffs. Here are 8 ways.

Apollo Global Management has an interesting discussion on The Growing Role of Private Credit but it was the above chart that caught my eye.

Relocating to the US vs Scaling Down

Trump wants businesses to relocate to the US, but the chart shows only 3 percent of service companies and 11 percent of manufacturers are taking steps in that direction.

In contrast, 13 percent of manufacturers and 15 percent of service companies are scaling down operations or closing the business.

Eating Costs or Passing them On

76 percent of manufacturers and 47 percent of service companies are passing on some costs.

50 percent of manufacturers and 42 percent of service companies are eating some costs.

New Domestic Supplier

37 percent of manufacturers and 26 percent of service companies seek a new domestic supplier.

That may be easier said than done, but it will still be more expensive than prior to the trade war.

Impact on Corporate Profits

Passing on costs is guaranteed to reduce sales.

Some corporations are likely planning hikes prices over time but that risks a consumer backlash dues to multiple hikes.

Either way, corporations will have less profits from sales in addition to the direct hit from eating costs internally.

Less profit also applies to companies who find a US supplier.

The Fed is Very Worried about Tariff Passthrough onto Prices

On June 8, I noted The Fed is Very Worried about Tariff Passthrough onto Prices

The Fed, businesses, and consumers are all concerned over price hikes.

Only Three Things Can Happen

1. Corporations can pass on the tariffs
2. Corporations can eat the cost
3. A combination of the above

The Results

• To the extent corporations pass on the costs, consumers will pay the tariff. That means consumers will cut back somewhere else, exhaust savings, or go into debt.
• To the extent corporations eat the costs, that’s a direct hit on corporate profits.
• If corporations misjudge how much they can pass on, they will also take a hit on profits.

Companies unable to pass on costs either have to eat the costs or shrink their business.

13 percent of manufacturers and 15 percent of service companies are now shrinking.

These numbers will get much worse given Trump Doubled Steel and Aluminum Tariffs to 50 Percent on May 31.

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