American Businesses Absorb Tariff Costs to Maintain Market Share

American businesses are reportedly absorbing most of the cost of new U.S. tariffs.

In recent earnings reports, General Motors said it paid $1 billion in tariffs in the second quarter, Stellantis said it paid $350 million and Hasbro said it expects to pay $60 million during the full fiscal year, The Wall Street Journal (WSJ) reported Thursday (July 24).

Last month, Nike said it expects tariffs to cost it $1 billion during the current fiscal year, according to the report.

Companies have been cautious about raising their prices to make up for the costs of tariffs because they could lose market share to competitors who don’t raise prices, because the tariffs may be temporary and, in some cases, because they don’t want to draw the ire of President Donald Trump, the report said.

When Walmart said in May that it would raise some prices, Trump posted online that the company and China should instead “eat the tariffs,” per the report.

In addition, some companies increased their inventory ahead of the tariffs to avoid that cost, according to the report.

While most of the cost of tariffs has been borne by American companies, the report said some foreign suppliers have trimmed their prices and some companies have increased the price paid by consumers, as evidenced by the June inflation reading rising from 2.4% in May to 2.7% in June, the report said.

Companies are also working to offset the cost of tariffs by cutting other costs, shifting their purchasing to new suppliers and introducing new products, per the report.

The PYMNTS Intelligence and Visa Acceptance Solutions collaboration “Consumer Tariff Sentiment: Informed Americans Are Skeptical of the Benefits” found that while large retailers have the ability to navigate the challenges posed by tariffs, smaller businesses may struggle.

The report also found that retailers are experimenting with “good, better, best” product tiers that include both premium domestic products and lower-priced imports; providing origin transparency that reassures buyers about the cost-value proposition of local manufacturing; and using artificial intelligence to segment customers not just by purchase history but values alignment, delivering personalized offers based on a shopper’s inferred beliefs about sustainability, nationalism or price sensitivity.

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