Zacks Investment Management

Leonard M. from New Orleans, LA asks: Hey Mitch, I’m in the camp of not liking tariffs. I view them as tax hikes that U.S. companies end up paying and/or that everyone in America will end up paying somehow, someway. With some of the tariffs in place and it seeming like they’re here to stay, have you seen any data on how the added costs are being passed through? What’s your general take here? Thank you.

Mitch’s Response:

Thanks for writing, Leonard. I take your point about not being a fan of tariffs. I think that in many cases, tariffs are counterproductive to growth and innovation, which are two outcomes we should all want in a healthy economy. I would not go so far as to say tariffs choke off growth and innovation completely, but I’d make the argument that they don’t help.

The framing of your question is an important one: tariffs may appear as though they’re paid by foreign exporters, but in practice, the bill often ends up on the doorstep of U.S. businesses and consumers.

When a tariff is imposed, it’s the importer—often a U.S. manufacturer, wholesaler, or retailer—that pays the duty when goods arrive at a U.S. port. That’s the first sign that domestic firms are on the hook. The bigger question is whether they pass those costs along, absorb them into their margins, or look to suppliers for price relief.¹

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As far as I can tell today, we’re seeing a mix of all three. But there’s growing evidence that U.S. firms are footing most of the bill.

Before I continue, please note that the examples cited below do not constitute investment recommendations on specific stocks, which I do not provide in my columns. I’m simply offering examples based on recent earnings reports.

General Motors is one example. The company recently reported that tariffs clipped more than $1 billion from profits, even as the carmaker largely chose not to raise vehicle prices. Other large firms, like Nike and 3M, have also disclosed significant tariff-related costs and while some are rolling out strategic price hikes, most are waiting to see whether these policies stick. This seems to be a theme for now, with companies choosing to “eat” the tariff costs to protect market share, especially in price-sensitive segments.

It’s also true that many firms stocked up on inventory ahead of tariff increases, delaying the full impact and allowing them to currently hold off on any price increases. Others have negotiated with foreign suppliers or shifted sourcing to countries with lower duties. There are even isolated cases, like some Japanese automakers, where exporters temporarily lowered prices to stay competitive. But overall, import price indexes have remained steady, suggesting that foreign suppliers aren’t slashing prices to offset tariff costs in any meaningful way.

In short, you’re not wrong. Tariffs are functioning as a tax, and so far, U.S. firms have borne the bulk of the burden. Some costs are beginning to pass through to consumers, but businesses are doing what they can to delay or soften the blow. The longer tariffs stay in place, and especially if they expand, the more likely it is that we see those pressures filter into prices and also into earnings.

Tariffs may start as business costs, but over time, they can pressure prices, earnings, and ultimately, portfolios. If you’re planning for retirement, it’s critical to build a strategy that can handle these kinds of disruptions.

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