Expect price increases even if the tariff plan changes

Tariffs are going to increase prices. That much we know for sure.

In fact, some prices are already rising because of the additional tariff on Chinese goods levied in February by President Donald Trump. Tariffs targeting Canadian and Mexican products also went into effect last month.

What’s not known is how quickly the broader set of tariffs, if enacted again, would hit different categories of goods.

Those tariffs went into effect early Wednesday, but by midday, Trump reversed course, putting a 90-day pause on all trading partners who haven’t retaliated against the U.S. That doesn’t include the tariffs on Chinese goods, he said in a post on Truth Social.

Tariffs on China will increase to 125% because of the country’s “lack of respect” it has shown global markets, he wrote.

Now, consumers get to play the waiting game. Standard & Poor’s crunched numbers based on Trump’s plan last week and concluded clothes could increase up to 37%, toys 30% and TVs 10%.

“It’s going to filter relatively quickly if those tariffs do materialize,” said Gregory Daco, chief economist for Ernst & Young’s Parthenon.

Tariffs could raise apparel prices in three to six months after they are enacted, said Liza Amlani, principal at Retail Strategy Group. So if they go into effect in 90 days, the increases could hit during the holiday season.

But some higher price tags could come even before more tariffs are enacted, Amlani said. Companies will incur costs preparing for what could come, she said, and prices could be adjusted.

“I don’t think brands have the luxury to wait and see what happens,” Amlani said. “They will need to find cost savings and improve efficiencies across their supply chain and operations no matter what the future holds.”

Retailers also could decide not to raise prices at all on some items.

Rick Gomez, Target’s chief commercial officer, said last month he couldn’t provide specifics on categories and items, but he said the company is considering its pricing architecture when making decisions.

“It’s not just item for item. A great example is our $5 tees. We’re not going to raise the price on T-shirts, but we do know we have more flexibility when it comes to dresses,” Gomez said during a call with journalists.

But based on Trump’s plan most apparel categories would see price hikes.

Half of Nike sneakers, for example, are made in Vietnam, according to Bloomberg News. And there would be a 46% tariff on Vietnamese goods under the plan.

Footwear Distributors and Retailers of America, whose members include Nike and Skechers, calculated that a $155 running shoe made in Vietnam would go up to $220.

The Trump administration said tariffs level trade imbalances and also increase U.S. manufacturing.

But many analysts were surprised by the broad nature of the tariffs. A month ago, Target executives discussed the company’s effort to diversify the countries it imports from, adding countries across Asia, Guatemala and Honduras.

A majority of apparel sold in the U.S. is manufactured in China, Bangladesh and Vietnam. China is facing a 125% tariff as of Wednesday afternoon. If enacted in 90 days, Bangladesh would be met with a 34% tariff.

And with reciprocal tariffs on more than 60 countries, retailers would have a hard time adjusting supply chains before having to pass costs on to consumers, said Neil Saunders, managing director of GlobalData Retail.

“The manufacturing base for clothing and footwear is in locations where tariffs are high, and there is no way retailers can simply swallow the increased costs,” Saunders said.

Synthetic materials, often found in leggings and other athleisure items, would be more likely to show higher prices because most are coming from a south Asian country, Amlani added.

An Ernst & Young (EY) survey of 4,000 executives found that half would be willing to pass on up to two-thirds of the added costs from tariffs onto their consumers.

Chuck Gregorich, CEO of Net Health Shops in Eau Claire, Wis., told Bloomberg News his company would have to raise prices on the fire pits and other home goods it sells by as much as 25% once inventory needs replenished.

He said he was speechless over Trump’s tariff plans.

“I couldn’t even talk I was so bummed,” Gregorich said.

He’s hoping he’ll know exactly what the cost of tariffs will be when he needs to place his next overseas order.

For larger retailers, there’s more room to “absorb the pain” of tariffs, Bagchi said.

“It’s not going to flow through one-to-one because there’s margin baked in. If the tariff is 30% or 25%, it’s not going to be a 25% increase on the shelf. It might be a 5% or 10% because at each step somebody can take some hit,” Bagchi said.

Small businesses such as Gregorich’s have less flexibility in keeping prices low.

In an email sent to customers on Monday, Nurture&, a nursery furniture company, urged those in the market for a nursery glider, crib, dresser or kids bed to make purchases now. The company is honoring its lower pricing through April.

“We’re in a spot where we’re already seeing some companies implement price increases due to increased tariffs,” said Jill Gruys, chief merchant for Nurture&.

Electronics are another area of concern for price-conscious shoppers. About 60% of Best Buy’s products, by cost, come from China.

It’s unclear how or when these additional tariffs on China will affect Best Buy’s pricing and sales. The company carries an average of six weeks of inventory. But officials at the Richfield-based retailer expressed concern about the threat of tariffs during its most recent earnings call.

In the grocery department, in addition to produce, shoppers could expect to pay higher prices for seafood, chocolate and rice, retail analyst Burt Flickinger said.

Anticipate Halloween candy prices to be much more expensive, he added.

Dakota Elbaum, 31, said he already can’t afford to shop at Lunds & Byerlys, where he is a cheese specialist. He was picketing Tuesday for a better contract in front of the store’s Maple Grove location with fellow members of the United Food & Commercial Workers Local 663.

“I am struggling to buy groceries,” said Elbaum, who makes $22.50 an hour and lives with his girlfriend and a roommate in a two-bedroom apartment in Richfield.

This article includes reporting from Bloomberg News and Reuters.