- Donald Trump campaigned on implementing a minimum tariff of 10% on all goods imported from the US.
- Months before Trump’s inauguration, tariffs are already on the lips of global business leaders.
- So far executives from Ralph Lauren, BMW, Airbus, Ikea and others have commented.
As soon as Donald Trump won a second presidential term, CEOs around the world discussed his plans for a new era of global tariffs.
Although inauguration day is two months away, executives from consumer giants such as BMW, Ikea, Airbus and Ralph Lauren were asked about plans by the press and on earnings calls this week.
Trump has pledged to impose a minimum tariff of 10% on all goods entering the US and up to 60% and 100% on goods imported from China and Mexico.
He also imposed a 100% tariff on imported vehicles and said he would impose a 200% tariff on machinery giant John Deere if it went ahead with plans to move some production to Mexico.
Asia
During Trump’s first term, the US and China imposed tariffs against each other on billions of dollars worth of goods. Now, the potential for new trade disputes has some business leaders in Asia worried. Chinese stocks fell after news of Trump’s election victory.
Shinji Aoyama, a global executive vice president at Honda Motors of Japan, said in a call Wednesday that the new tariffs in Mexico would have a big impact on Japanese companies. Honda, for example, has manufacturing plants in Mexico.
“If the tariff is permanent — I assume it may not be permanent — we would probably go for manufacturing elsewhere that is not subject to the U.S. tariff that we could,” he said.
Aoyama said he did not expect tariffs to be imposed soon, but added that it would not be easy to stop production in Mexico quickly.
“Whoever the president is, we shouldn’t be too influenced by them,” he said.
Shinji Aoyama, a global executive vice president at Honda, said Wednesday that “we should not be too influenced” by the US president. YOSHIKAZU TSUNO/Gamma-Rapho via Getty Images
Piyush Gupta, CEO of Singapore’s top bank, DBS, said during a press conference on Thursday that he found it hard to believe that Trump would implement his proposed tariffs.
“The best thing to do is wait and see what policy they actually have,” Gupta said. “It’s very difficult to make predictions at this point in time.”
Instead, he emphasized the impact Trump’s policies could have on the Federal Reserve’s rate cut. Fewer rate cuts would boost net interest margin – a key metric for banks.
“I think a higher interest rate environment is generally better for DBS,” Gupta said.
He added that DBS will focus on legal and regulatory risks related to the Trump administration.
“They can come up with different kinds of sanctions and other policies — you have to be on top of that.”
Europe
Trump has repeatedly said that he sees the European Union’s trade policies as unfair.
During his first term, he imposed tariffs on key European industries, including steel, aluminum and some luxury goods. Europe responded in turn with tariffs on goods including bourbon whiskey, Harley-Davidson motorcycles and Levi’s jeans.
The US is Europe’s main trading partner, leaving its businesses highly vulnerable to tariffs.
Sectors such as automobiles, pharmaceuticals and chemical products, which represent the lion’s share of European exports to the US, would probably experience the biggest economic hit.
Shares of BMW, Mercedes and Volkswagen all fell in response to Trump’s victory. The US is by far Germany’s biggest export market, with $170 billion worth of goods shipped in 2023, according to Germany’s statistics authority.
On Wednesday, Oliver Zipse, the chairman of BMW, played down fears over tariffs during a third-quarter earnings call, citing the company’s large manufacturing base in the US.
“We have a strong footprint there, which protects us from anything that might happen on the geopolitical side,” he told analysts.
Zipse also told reporters, according to Reuters, that BMW “shouldn’t be too nervous about what might happen.”
Oliver Zipse, the chairman of BMW, said on Thursday that the company should not be nervous. Maja Hitij/Getty Images
Arne Freundt, CEO of German sports brand Puma, took a calm stance on the prospect of tariffs. “We can shift volumes to other countries quickly in the event of tariff increases in certain countries,” Freundt said.
“Politics is politics,” Ikea CEO Jesper Brodin told Business Insider when asked how Trump’s tariffs will affect international business.
“So we work with long-term cycles and investment frameworks and so on. At Ikea, we are very clear in our direction.”
Guillaume Faury, CEO of the airline Airbus, expressed more concern about how the tariffs could affect prices.
Addressing Trump’s tariff proposals during Airbus’ third-quarter earnings call the day before the election, Faury said the cost of any new tariffs would be passed on to Airbus’ airline customers as of 2020.
“We don’t believe this is helping aviation and the competitiveness of the airlines and the aviation industry, but it’s something we would be able to manage,” Faury said.
During his first term, Trump and the European Union were locked in a long-running dispute over aircraft subsidies, which the US said put Boeing at a disadvantage, and 15% tariffs were imposed on aircraft imported from the EU.
Shortly after Trump left the White House, the two sides ended their dispute and dropped the tariffs, but renewing the tariffs could lead to trouble once again.
Guillaume Faury, CEO of Airbus, said Trump’s policies could raise prices for customers. OZAN KOSE/AFP via Getty Images
Martin Sorrell, chief executive of UK-based advertising firm S4 Capital, described the president-elect as “good news” for North American businesses and companies.
“While American business doesn’t like to talk about it, basically American businesses wanted to see a Trump administration because that means low tax and low regulation,” Sorrell said during an earnings call Thursday.
He added that Europe will be more challenged because of the threat of tariffs.
US
While the tariffs are intended to protect domestic industries by making imports more expensive, companies whose supply chains include foreign contractors could see their costs rise.
Justin Picicci, Ralph Lauren’s CFO, said that over the past seven years, the fashion brand had diversified its resources and developed alternative manufacturing for its core products.
“Our global sourcing and supply chain is agile and well positioned,” Picicci said Thursday during an earnings call.
“So we’ll wait and see what, if any, policy is adopted going forward. But we’ve successfully navigated tariffs before, including not too long ago.”
The costs of tariffs are often passed on to the consumer in the form of higher prices. But as demand for local goods increases, consumers are seeing higher prices across the board.
Timothy Boyle, CEO of Columbia Sportswear, said in an interview with The Washington Post published on October 30 that the brand was set to raise prices if tariffs were imposed.
“It’s going to be very, very difficult to keep products affordable for Americans,” he said.
Correction: November 8, 2024 – An earlier version of this story misspelled the name of a Honda executive. He is Shinji Aoyama, not Shinju Aoyama.