Trump’s Tariff Freeze: What Could Have Happened if They Stayed in Place?

Hate to say you read it here first, but here’s a prescient quote left on the cutting room floor from PYMNTS CEO Karen Webster’s interview with QED Investors partner Amias Gerety just two days ago: “Because this is a self-inflicted economic wound, we get an extra dollop of uncertainty. Trump could reverse all of these tomorrow.”

He waited until the day after tomorrow. On Wednesday (April 9) Trump announced a temporary suspension of reciprocal tariffs for most countries, reducing rates to a universal 10%. However, tariffs on Chinese imports were escalated to a staggering 125%, citing China’s “disrespect” toward global markets. This sharp increase followed China’s retaliatory tariffs earlier in the week, intensifying trade tensions between the two countries.

The pause provided temporary relief to many industries and market, as seen in the Dow Jones surge by nearly 2,200 points. However, companies and economists remain cautious about its long-term implications. The freeze does not eliminate tariffs entirely, leaving uncertainty about future trade policies but also pulling the covers on what companies may do if the temporary freeze is lifted for an appreciable amount of time.

Corporate Reactions: Preparing for Tariffs

Had the tariffs remained in place, companies across various sectors were poised to pass increased costs onto consumers. Grocery chains like Morton Williams anticipated price hikes of up to 20% on imported items such as olive oil and canned tuna due to tariff impacts. Retailers like Target had already adjusted their inventory strategies earlier in the year to mitigate immediate price shocks but warned of steep increases for perishable goods like fresh produce within weeks.

Similarly, manufacturers reliant on imported components faced significant challenges. PepsiCo noted declining snack sales due to inflationary pressures even before the tariff announcements. If sustained, higher tariffs could have exacerbated these trends, forcing companies to shrink product sizes (shrinkflation) or reduce offerings altogether.

For smaller businesses with limited capacity to absorb costs, the effects would have been even more pronounced. Independent grocery stores and smaller manufacturers often adjust prices faster than larger corporations due to lower inventory levels. These dynamics highlight how prolonged tariffs, if they return, could disproportionately impact smaller players in the market.

A PYMNTS report released earlier this week showed “about half of SMBs rely on immediate sales or existing cash for survival, with business credit cards — which are not a working capital solution — being the most common form of financing for those with access,” PYMNTS wrote recently. ”SMBs with access to some method of financing demonstrate greater confidence in navigating economic challenges.”

The challenges extend to middle-market companies where — per additional PYMNTS Intelligence research — 60% of CFOs expect the tariffs to bring about additional economic uncertainty and planning challenges. The research also found that almost 70% of finance chiefs foresee supply shortages and product delays, with a similar share executing new costs to restructure their supply chains.

Consumer Price Hikes: A Looming Burden

Experts agree that if tariffs had stayed in place, consumers would have faced significant price increases across various sectors:

Groceries: Yale University’s Budget Lab estimated food prices would rise by 2.8% overall, with fresh produce increasing by 4%. Lower-income households would bear the brunt of these hikes as they allocate a larger share of their income to essentials.

Clothing: Apparel prices were expected to climb within three to six months due to higher costs for imported textiles and manufacturing inputs. Back-to-school shopping could have become notably more expensive.

Electronics: Items like smartphones and laptops, which are heavily reliant on China-manufactured components, would likely see steep price hikes under the 125% tariff rate, which is still in place. Although it has become something of an internet meme, the exponential increases in iPhone prices if they were manufactured in the U.S. is an example.

These increases would not only strain household budgets but also contribute to broader inflationary pressures. Economists warned that sustained tariffs could reduce GDP growth by 0.6% annually and cost the economy $80–110 billion per year. Wedbush Securities tech analyst Dan Ives said Tuesday in an interview with CBS News that Chinese tariffs could create a “category 5 price storm” for personal electronics and other gadgets. Taxing China and other nations at such rates is the equivalent of “flipping a boat upside down in the ocean with no life rafts,” he added.

Future Tariff Policy

The temporary freeze has reignited debates on how tariffs should be handled moving forward. Gina Bolvin of Bolvin Wealth Management emphasized that clarity in trade policy is essential for market stability. She described the pause as a “pivotal moment” but cautioned against celebrating prematurely given ongoing uncertainties. Bolvin said the timing also “couldn’t be better” given major financial institutions including Bank of New York Mellon, BlackRock, JPMorgan Chase and Wells Fargo report earnings on Friday.

“This pause may provide companies with a clearer backdrop for their guidance, offering some relief to a market hungry for direction,” Bolvin added.

John Canavan from Oxford Economics noted that unilateral tariff policies create significant risks for global commerce. He advocated for negotiated agreements rather than abrupt policy shifts that destabilize markets. “There have been very mixed messages on whether there would be negotiations,” Canavan said. “Given what’s been going on with the markets, he realized the safest thing to do is negotiate and put things on pause.”

Other developments before the tariff reversal showed how companies were prepared to deal not only with increased costs but from the uncertainty of the tariff drama.

New tariffs on low-value packages from China could hinder the plans of Shein and Temu. As the Financial Times (FT) reported Tuesday (April 8), the White House has upped duties on those packages to 90% of their value, or a flat fee of $75 that would increase to $150. The duty goes into effect May 2, with the flat-fee hike happening after June 1. The shift follows Trump’s closing of a loophole that allowed Chinese imports under the “de minimis” threshold of $800 to arrive duty-free.

Walmart announced it was pulling its first-quarter operating income outlook due in part to tariff-related concerns.

“The range of outcomes for Q1 operating income growth has widened due to less favorable category mix, higher casualty claims expense and the desire to maintain flexibility to invest in price as tariffs are implemented,” the retail giant said in a news release Wednesday.

Walmart had forecast operating income of 0.5% to 2% for the first quarter when it released fourth-quarter earnings result in February. The company is scheduled to release its full earnings May 15. Walmart said it expects first-quarter sales growth to be in line with a 3% to 4% outlook, with annual sales and operating income growth guidance unchanged, per the release, timed to coincide with the company’s Investment Community Meeting.

Thousands of Canadian autoworkers were furloughed before the tariffs were rolled back. Now, Canada’s largest private-sector union is warning these temporary layoffs could be the beginning of larger troubles for the sector, Bloomberg reported Wednesday.

“The industry will not be able to live under these kinds of tariffs,” Unifor President Lana Payne said, per the report. “The longer this goes on, the bigger the fallout we’re going to see. My concern is that we see temporary layoffs turn into much longer layoffs.”

Around 6,000 Unifor members were laid off temporarily after Trump’s April 2 announcement of tariffs on most countries, the report said. The bulk of those notices went to workers at a Stellantis plant in Windsor, Ontario, which produces Chrysler and Dodge vehicles, and which shut down for two weeks as the carmaker examines the impact of the tariffs, according to the report.

Amazon reportedly canceled orders from multiple vendors in China and other Asian countries.

The company’s cancellations of the orders came without warning and didn’t mention tariffs, but their timing suggests they came in response to the tariffs, Bloomberg reported Wednesday, citing unnamed sources and a document it had seen.

It’s not known how widespread Amazon’s cancellations of orders are, according to the report. The report cited one vendor who said the company canceled a $500,000 order and an eCommerce consultant who said Amazon canceled orders from “several” clients. Amazon did not immediately reply to PYMNTS’ request for comments.

About 40% of the products sold on the company’s website are purchased by Amazon directly from vendors, while the remainder are listed on its site by third-party sellers, according to the report.

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