Businesses are bracing for Trump tariffs with frontloading and price hikes

Bracing for impact: US and European businesses are preparing for an anticipated US wave of tariffs by frontloading orders and considering price hikes, Bloomberg reports. These potential tariffs are creating more uncertainty for businesses, which had already pivoted some of their operations and supply chains to address tariffs and policies under US president-elect Donald Trump’s first presidency in 2018.

Several companies are frontloading orders and shifting their supply chain from countries expected to be targeted by tariffs, while others are seeking new suppliers or renegotiating terms with existing ones. Meanwhile, US container gateways are experiencing a surge in inbound shipments — a trend that is expected to continue until the spring of 2025, CEO of Long Beach’s port Mario Cordero said.

A costly strategy: The increasing pace of frontloading can lead to higher shipping costs and potentially create bottlenecks at US ports, said Citigroup Inc. senior global economist Robert Sockin. Meanwhile, potential port strikes in the US in the upcoming weeks add more chaos to the global trading system, fueling frontloading orders and stock build-up.

The looming tariffs are also pushing companies to consider price hikes to maintain their net income margins. However, price hikes will have to be limited for these companies to remain competitive.

IN CONTEXT- President-elect Donald Trump, set to take office on 20 January, has proposed a 60% tariff on Chinese goods, followed by an additional 10%, as well as a 10% tariff on imports from other countries. Separate tariffs targeting Canadian and Mexican goods have also been suggested, leaving businesses scrambling to adapt to the potential cost increases and supply chain disruptions.

Chinese businesses are also exploring alternatives: Several Chinese companies are expanding into other markets in Europe and Southeast Asia in preparation for US tariffs, Bloomberg reported earlier. Some firms are considering establishing production operations in the US, aiming to completely avoid tariffs, while others are planning to rely on Chinese customers, capitalizing on their large order capacity.

MARKETS THIS MORNING-

Asian markets are mixed this morning, with Japan’s Nikkei down 0.7%, Australia’s ASX 200 down 0.6%, while Shanghai Composite is up 0.2% in early trading. Meanwhile, Dow, Nasdaq, and S&P futures were all slightly down in overnight trading.

THE CLOSING BELL-

The ADX fell 0.5% on Friday on turnover of AED 826.4 mn. The index is down 2.6% YTD.

In the green: Oman & Emirates Investment Holding (+12.5%), Aram Group (+9.9%) and RAK Co. for White Cement & Construction Materials (+2.7%).

In the red: E7 Group (-2.7%), NMDC Energy (-2.1%) and Phoenix Group (-1.6%).

Over on the DFM, the index rose 0.4% on turnover of AED 334.5 mn. Meanwhile Nasdaq Dubai closed down 0.4%.