### Corporate Leaders Cautious Amid Trump's Proposed Tariff Hike

Corporate leaders are adopting a cautious stance regarding President-elect Donald Trump's promise to implement heavy tariffs on imports when he takes office in January 2024. Concerns are growing over the potential inflationary effects of these tariffs, as expressed by numerous major U.S. corporations in recent investor events and conference calls since the Nov. 5 election, when Trump narrowly defeated sitting Vice President Kamala Harris.

Walmart, the largest retailer in the United States, highlighted the potential impact on prices following the release of their latest financial results. "We're concerned that significantly increased tariffs could lead to increased costs for our customers at a time when they are still feeling the remnants of inflation," a Walmart spokesperson stated.

Trump has pledged to make tariffs a cornerstone of his economic policy. Executives have increasingly been queried about this issue, with many pointing out their continuous efforts to diversify supply chains, especially away from China, which remains Trump's primary target. Data from LSEG reveals that, since the beginning of September, executives from nearly 200 companies on the S&P 1500 Composite index have discussed tariffs in earnings calls and investor conferences, nearly doubling the number from the same period leading up to the 2020 election, and significantly higher than the 23 mentions recorded in 2023.

Lowes' CFO Brandon Sink commented on the potential implications, noting, "Roughly 40% of our cost of goods sold are sourced outside of the U.S., including both direct imports and national brands through our vendor partners." He added that the tariffs would certainly add to product costs.

The Trump administration has hinted at imposing 60% tariffs on China, the world's largest exporter, and universal tariffs of 10% or more to eliminate the U.S. trade deficit. According to Oxford Economics, a 60% tariff on China could raise U.S. inflation by 0.7 percentage points, while a broad-based tariff would increase inflation by 0.3 points. While Oxford foresees a gradual introduction of these tariffs, some analysts are concerned about the potential for a shock effect.

"Trump 47 won't be a mere replay of Trump 45," remarked Brian Jacobsen, chief economist at Annex Wealth Management, indicating that Trump's current proposals are "far more expansive."

Sectors that heavily import goods into the United States include electronics, transportation equipment, chemicals, and minerals, per the U.S. International Trade Commission. Taiwan, a crucial partner for the U.S. semiconductor industry, has also become a target in Trump's rhetoric. He suggested that Taiwan should finance U.S. protection against China and accused it of undermining the U.S. semiconductor industry.

Retail sectors are also poised to be affected. According to the National Retail Federation, tariffs could inflate prices on clothing, toys, furniture, appliances, footwear, and travel goods, especially from China. Stanley Black & Decker's CFO Patrick Hallinan, at a recent Robert W. Baird investor conference, stated that existing tariffs cost the company around $100 million annually, a figure that could double under Trump's proposals.

In response to previous tariff measures and legislative efforts during Joe Biden's presidency aimed at boosting U.S. manufacturing, companies have already begun shifting production away from China. Despite these changes, U.S. goods imports from China remain significant, though they have decreased from a peak of $538.5 billion in 2018 to $433.3 billion for the 12 months ending in September 2023.

Executives also noted that businesses might be better equipped to manage these shifts due to the adaptations made in response to multiple disruptions, including the COVID-19 pandemic, labor strikes, and interruptions in key global waterways like the Panama and Suez Canals. "We've had so many disruptions and challenges that have forced us to make adaptions. We're pretty well versed in managing through this," remarked Tapestry CFO Scott Roe.