New tariffs will soon be implemented broadly. On Wednesday, President Donald Trump declared an imposition of 10% tariffs applicable to all countries, except for goods that comply with the United States-Mexico-Canada Agreement (USMCA). Some countries are expected to be more affected than others as Trump aims to create a level playing field by imposing reciprocal tariffs.
Key Points for Investors:
1. Significant Tariffs for "Worst Offenders"
In addition to the overarching 10% tariff, Trump has outlined that goods from countries he claims impose high tariffs on U.S. products will face increased tariffs when entering the U.S. Sixty countries are on this list, including China, which will experience a 34% tariff. This is on top of existing tariffs of 20%, bringing the total tariff on Chinese imports to 54%. Cambodia, facing a 49% tariff, and Vietnam, with a 46% tariff, are also significantly affected. Imports from the European Union will see a 20% tariff rate. While Canada and Mexico are not on the "worst offenders" list, their non-USMCA-compliant goods will be subject to a 25% tariff. Notably, there will now be tariffs imposed on foreign-made automobiles without any pauses.
2. Implementation Timelines
Consumers will soon feel the effects of these tariffs. Tariffs on foreign-made automobiles are set to take effect at midnight on Thursday. The comprehensive 10% tariff will be enforced starting April 5, and the customized tariffs for specific countries will be applied beginning April 9. This leaves businesses with limited time to adjust. Major retailers, like Walmart, Target, and Costco, cognizant of the high inflation, are actively engaging with suppliers in China to mitigate the impact of the tariffs on consumers. If unsuccessful, these retailers might have to increase prices for consumers, further stretching budgets, or deal with tightened profit margins, which are generally slim.
3. Closure of the De Minimis Exemption
The de minimis exemption, which allowed low-cost items from Asia under $800 to avoid tariffs, will be closed effective May 2. This change means these low-priced items, including those purchased from companies like Shein and Temu owned by PDD Holdings, will now be subject to a 54% tariff, potentially raising consumer costs significantly. As these companies may increase their prices, Amazon could benefit by attracting more consumers to its "Amazon Haul" discount store, introduced last year to compete.
Outlook for Investors
While tariffs may drive up costs and impact business margins, they might not be permanent. Trump’s approach as a dealmaker suggests these measures could be temporary. Businesses such as Walmart and Costco are expected to adapt over time. Despite the short-term effects, there may be opportunities for investors, particularly those focused on long-term growth. Investors are advised to focus on companies with strong margins capable of weathering the storm.
Disclosure
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Jagielski, the article’s author, holds no positions in the mentioned stocks. The Motley Fool holds and recommends positions in Amazon, Costco Wholesale, Target, and Walmart.
