Untangling tariffs: Consumers expected to bear the brunt

While the ultimate shape of a burgeoning tariff war remains unclear, CFOs and finance leaders made one thing clear in a recent survey: The majority of any added costs incurred will be passed on to consumers.

In a Gartner survey last week of 192 CFOs and finance leaders at organizations with global operations, respondents reported that, on average, 73% of cost increases related to tariffs would be absorbed by their companies’ customers. Nearly three in five (59%) leaders from a cross section of industries said their companies would absorb 0% to 10% of any increased costs.

“CFOs are strategically responding to new tariffs, focusing on cost management and supply chain adjustments to mitigate the financial impacts,” Alexander Bant, chief of research in the Gartner Finance practice, said in a news release. “While a majority of CFOs are not expecting their organizations to absorb most tariff-related costs, some do, likely indicating varying levels of price sensitivity among customers and suppliers for specific organizations.”

Twenty-nine percent said their companies planned to pass less than 10% of tariff-related costs to customers, a number that Bant said indicated an effort by some organizations to minimize the bottom-line impact of tariff costs by looking to other areas for cost savings.

Late last week, the Trump administration delayed some tariffs on Canada and Mexico that had gone into effect earlier in the week but kept new tariffs on China in place and signaled more tariffs to come early next month.

In February, the White House placed an initial round of tariffs on China and announced tariffs on Canada and Mexico before delaying them 30 days. Amid that backdrop, 305 CPA decision-makers in business and industry in the United States shared thoughts on tariffs in the quarterly AICPA & CIMA Economic Outlook Survey:

• Fifty-nine percent viewed the likely impact of potential tariffs on their businesses to be negative, citing increased prices to customers, the possibility of retaliatory tariffs that could affect their export business, and increased costs along the supply chain.
• Fourteen percent predicted a positive impact in the form of increased costs facing their competitors.
• Forty-nine percent cited a significant or moderate level of uncertainty around tariffs.

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.