In the aftermath of President Donald Trump’s “liberation day” tariffs, consumer goods companies were divided into the seriousness of their impact. Some have torn financial forecasts apart, while others have said analysts and investors can survive the storm in recent weeks.
But the companies that produce everything from PlayStation consoles to mayonnaise and laundry detergents in the Western world have almost agreed on one thing. Trump’s tariffs mean consumer prices must rise.
But the problem for Procter & Gamble, Nestlé, Unilever and other giants in the consumer goods industry is that after three years of heavy inflation, shoppers may not have any more pain due to US consumer trust at the lowest level since 2020.
“Consumers are tired,” said Rob Holston, EY’s global consumer products lead. “They’re not only are they getting higher prices for cornflakes, but they’re also getting more complicated in their lives: unemployment, uncertainty in the recession and how long this will last.”
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After announcing sudden tariffs on US trading partners on April 2, Trump then announced a 90-day suspension, allowing him to be deprived of the room for new trade deals. The 10% tariff on the majority of imports remains a baseline tariff from China, subject to a 145% tariff, except from China.
As a result, businesses ranging from adidas to luxury group Hermes have warned that US consumers will pay higher prices.
Seven major luxury brands raised prices around the world in April, according to City analysts. LVMH-owned Dior and Louis Vuitton have increased prices by 4 and 5% respectively with the choice of products the bank tracks, while Richemont-owned Van Cleef & Arpels have increased prices by 5% for almost the entire range.
Household goods producers, including Colgate Palmolib, Nestle and Unilever, have also shown that they will raise prices to offset the impact of tariffs.
Mintel analyst Rich Shepherd said price increases will likely be more sharp for US consumers than for other countries.
PlayStation controller on display at a California store in December © Justin Sullivan/Getty Images
“What people have to deal with is extremely difficult in terms of price increases,” Shepherd said, adding that consumers are used to “a constant swirl of uncertainty.”
“There may be some points where people reach a breakpoint, but at that moment, this is the next thing you need to think about,” he said.
There are indications that consumer goods companies are locked in negotiations with retailers on both sides of the Atlantic, and gaining support for price increases has proven difficult.
An executive at one major UK supermarket said it was “causing bullshit” to businesses seeking to drive price hikes under tariffs. Trump’s most tariff suspension means that, at least for now, the only significant increase in obligations is in shipments between the US and China.
“We can source virtually all of our materials from countries other than the US, perhaps apart from walnuts,” the executive said. “Suppliers are driving price increases, and we’re telling them: “Look, you need to be careful here. Otherwise you’ll kill the golden geese.” Consumers can’t take any more. ”
Serial maker WK Kellogg reported this week that sales fell 8.6% in the first quarter.
Even before Trump’s tariffs, tensions were high between supermarkets and suppliers. Heineken’s chief financial officer, Harold Van Den Broke, told analysts last month that some European supermarkets are demanding prices be reduced from them.
“We are in tough negotiations because we don’t believe that (price reductions) are not fully guaranteed,” Van Denbroke said.
There are also few indications of improved consumer demand. US breakfast cereal producer WK Kellogg reported this week that sales fell 8.6% and prices rose 3% this week in the first quarter.
Foam Shoe Company Crocs pulled out financial guidance on Thursday, citing “potentially softening consumer demand” due to tariffs. “We look forward to the industry rising in terms of prices,” CEO Andrew Reese told analysts.
Walmart, the top US retailer that plans to keep prices down on some products to gain market share, is set to report revenue for next week.
Crocs pointed to financial guidance on Thursday. cited “potential softening of consumer demand” due to US President Donald Trump’s tariffs © Christian Vierig/Getty Images
Michael Waterson, a professor of economics at Warwick University, said multinational companies with a wide range of products, such as Unilever and Nestlé, have “critical latitudes” about where to pass on the increased costs.
He added that one key factor driving that decision is probably the extent to which demand weakens as prices rise across the company’s product portfolio.
“It makes economic sense to load prices with regions where demand is declining,” Waterson said.
Shoppers said they are most likely to reduce their spending on snacks, sweets, alcohol, meals and takeaway foods, according to an annual consumer survey of 20,000 EY in 26 countries published in March. They are less likely to reduce their purchases of fresh food, household care products, clothing and footwear.
DZ Bank analyst Claus Niegsch said that while many consumer goods are likely to be more expensive in the US, it may not be in Europe.
Niegsch said goods originally intended for the US market will be diverted to other markets at knockdown prices to avoid customs duties.
In April, the first month since Trump launched its latest trade war, exports to China to China fell 21% compared to last year. Exports to Europe increased by 8%.
Niegsch said:
Additional reports from Gregory Meyer of New York and Florian Muller of Frankfurt
