PwC’s US Tariff Industry Analysis – Consumer Products

In brief

What happened?

Since taking office on January 20, President Trump has introduced several policies and executive orders. On his first day in office, he issued the America First Trade Policy, which launched an investigation into unfair trade practices, expected to conclude on April 1. A key component of this investigation, "Unfair and Unbalanced Trade," targets countries with significant annual trade deficits in goods, potentially subjecting them to country-specific tariffs. This includes several European Union nations (e.g., Germany, Ireland, and Italy), Asian jurisdictions (e.g., Vietnam, Japan, and Taiwan), and other global trade partners. A review of unfair trade practices by other countries and a consultation with respect to the United States-Mexico-Canada Agreement (USMCA) also are key components of the investigation.

Additionally, on February 13, President Trump introduced the Fair and Reciprocal Plan, designed to evaluate and impose reciprocal tariffs on countries that enforce higher duties/tariffs on US goods, including through a value-added tax or other non-tariff barriers. The European Union, India, and Japan have been identified as potential targets due to their tariff policies on American products.

Both the America First Trade Policy and the Fair and Reciprocal Plan are expected to have their investigations completed by April 1 with potential new tariffs as soon as April 2. 

Why is it relevant?

Importers and purchasers across all sectors, including the Consumer Products industry (i.e., consumer goods and retail), must assess the potential impacts of these new policies on a go-forward basis. In PwC’s US Tariff Industry Analysis, the data reflects that the total tariff impact could increase from $27 billion a year to approximately $134 billion a year for the Consumer Products industry, even before taking into account potential countermeasures that trading partners may impose, or behavioral adjustments that companies may make, in reaction to US policy changes.

For some companies in the Consumer Products industry that may have been mostly shielded from tariffs that have been in place since 2018, these new tariffs introduce a challenge. Companies in this industry face an immediate impact with increased costs, supply chain disruptions, and volatility due to increased consumer prices.

Action to consider

As tariff rates continue to evolve, it is crucial for US multinational corporations to assess the impact of these trade policies on their business operations and supply chains.

Each multinational corporation, including those not currently subject to tariffs, should assess the pre/post impact of the tariffs on its earnings per share and overall shareholder returns. Focusing the impact assessment at operating profit potentially could create a drag on earnings per share based on the implication of corrective actions on the statutory model. It is crucial for companies to dynamically model the changes to have data-driven insights that inform strategic decisions moving forward. For the Consumer Products industry these new and proposed tariffs could be assessed on the full value of US imports to the tune of $463 billion (i.e., imposed on both “Dutiable” and “Non-Dutiable" goods). Additionally, companies in this industry should consider whether existing trade, logistics and sourcing operations, and regulatory controls could be enhanced to address the changing risk profiles associated with the new tariffs.

For more details, read the full Tax Insight linked below.