The impact from tariffs has so far been most immediately felt in financial markets, with stocks erasing nearly a year’s worth of gains amid fears of an economic growth slowdown or outright recession.
Now, companies are starting to issue more concrete warnings about the impact that tariffs could have on their bottom lines — and on consumers.
Executives at PepsiCo, whose first-quarter earnings missed analysts’ projections, flagged supply chain disruptions and increased costs. The food and beverage giant also lowered its forecast for core constant currency earnings per share — a metric that accounts for foreign currency movements — citing the impact of tariffs and more value-conscious consumers.
“As we look ahead, we expect more volatility and uncertainty, particularly related to global trade developments, which we expect will increase our supply chain costs,” CEO Ramon Laguarta said. “At the same time, consumer conditions in many markets remain subdued and similarly have an uncertain outlook.”
Procter & Gamble’s quarterly earnings beat estimates, but sales slid below expectations. Executives also slashed their full-year forecast for core earnings per share, pointing to both weaker consumer demand and direct effects from President Donald Trump’s tariffs on the company’s operations.
“There will likely be pricing — tariffs are inherently inflationary — but we’re also looking at sourcing options,” P&G CEO Jon Moeller told CNBC on Thursday morning.
Both P&G and PepsiCo raised prices in recent years amid record inflation, which lifted sales but ultimately flattened volumes as shoppers sought cheaper brand alternatives or snipped items from their budgets altogether.
Consumers have increasingly turned to different forms of credit to stretch their cash flow amid rising prices, which could become even more of a crutch as tariffs creep into household purchases. Both credit card debt and late card payments hit record highs earlier this year, and the use of buy now, pay later loans for essential goods has skyrocketed.
In a survey of BNPL borrowers published by LendingTree on Wednesday, 41% of respondents said they paid late on at least one loan in the past 12 months, up from 34% a year ago. At least a fourth of borrowers now use the installment loans for groceries, up from 14%, the survey found.
Trump’s trade war is also set to reach homebuyers soon. The CEO of homebuilder Pulte estimated tariffs could add as much as $5,000 on average to the sale price of new homes.
“Whether it’s the volatility in the stock market, concerns about tariff-induced inflation, the fluctuation in interest rates or the growing talk of recession, demand in April has been more volatile and less predictable day-to-day,” Ryan Marshall told analysts.
CNBC calculations show that approximately 75% of S&P 500 companies that have reported earnings through Thursday morning have mentioned some impact from tariffs in their most recent earnings.
While Trump has suspended country-by-country tariffs until early July, he has imposed an across-the-board 10% duty on all imports and set duties as high as 145% in place for Chinese imports. He’s also slapped levies on certain products like steel and autos. Trump has signaled a softer stance this week as he seeks new trade deals — but so far, most countries have yet to take him up on any offers.
As a result, companies are wading through a sea of uncertainty and responding by telling investors to expect lower returns. Earnings from other consumer goods giants Thursday morning flashed looming concerns.
Trump received warnings about the possibility of empty shelves after meeting with big-box retailers, according to an individual familiar with the White House policymaking. The executives said the impact could come as early as the July 4 shopping weekend.
The combination of ballooning supply chain costs and consumer pullback is what ultimately creates conditions for empty shelves, said Neil Saunders, managing director and retail analyst for GlobalData.
“They have to make a decision as to whether it is worthwhile importing products from China to put on the shelves, because the prices might need to go up by so much that actually no consumer would really be interested,” Saunders said. “You might as well just say, forget it, we just won’t stock that product. That obviously does leave gaps on the shelf.”
Ocean container bookings from China to the United States have already declined more than 60%, according to data from Flexport, a logistics platform. Meanwhile, year-over-year trucking activity out of Los Angeles has declined 23%, rattling industry players in the logistics space.
“Trucking volumes have collapsed to near pre-Covid levels,” Craig Fuller, founder of the publication FreightWaves, wrote Tuesday in a post on X. Citing the real-time freight data platform Sonar, he added that “with imports deteriorating, volumes are expected to fall by another 3-4% over the next month.”
Imports and exports accounted for more than 32% of freight tonnage moved domestically by truck as of 2023, federal data shows.
The Federal Reserve’s bi-quarterly Beige Book report, which surveys business conditions in its districts, found companies were already starting to adjust their pricing to account for tariffs, such as by adding surcharges for raising prices outright.
One area that is not yet seeing an impact is significant job losses. On Thursday, the Labor Department said weekly claims for unemployment assistance rose by just 6,000; the four-week moving average has shown no uptick. However, the Census Bureau’s biweekly Business Trends and Outlook Survey, a near-real-time measure of economic conditions, shows employment plans have continued to deteriorate.
Bob Elliott, CEO of Unlimited Funds investment group, said it may still take some time for the tariffs to start to be fully felt by consumers. He observed that the most intense demand shock that occurred prior to Covid, when President Jimmy Carter effectively asked Americans to stop shopping in order to curb soaring inflation in the 1970s, played out over about six months.
“Anecdotally, producers are rushing to get production done before supply chains get wrecked,” Elliott said. “They’re trying to build up inventory and put themselves in a position so they have stock for a little while to absorb uncertainty of tariff environment.”
But if firms continue to be squeezed by higher costs, they are likely to begin lowering head counts. Guy Berger, director of economic research at the Burning Glass Institute labor consultancy, noted on X there’s been a surge in the share of firms planning to cut staff.
In a follow-up interview, FreightWaves’ Fuller said firms that handle logistics in Southern California — that region’s second largest employment sector — are likely going to start seeing workforce reductions given their exposure to Chinese import flows.
“That’s going to really be the first time people become aware of how bad this is,” he said.
