Trump tariffs may cost firms $1.2 trn, consumers to bear burden: S&P Global

S&P Global report states that two-thirds of the total additional cost will be passed on to the consumers via higher prices, while one-third ($315 billion) is absorbed internally through lower earnings

Tariffs imposed by United States (US) President Donald Trump are expected to cost companies at least $1.2 trillion in additional expenses in 2025, most of which will ultimately be borne by consumers, according to a report by S&P Global released last week.

 

S&P has revised its January 1 estimates, projecting company expenses for this year to reach $53 trillion, reported Fortune.

 

"Revenue expectations have risen — but earnings expectations have fallen — producing a 64-basis-point contraction in margin, according to 15,000 sell-side analysts contributing to the S&P Capital IQ and Visible Alpha Estimates," the report said, adding that if similar trends affect firms without sell-side coverage, the cost shock could exceed $1.2 trillion in lost profits.

 

 

It highlighted that the trillion-dollar financial pressure comes from multiple sources. "Tariffs and trade barriers act as taxes on supply chains and divert cash to governments; logistics delays and freight costs compound the effect. Wage inflation and energy prices transfer income to labour and producers. Rising capital expenditure, particularly in AI infrastructure, redirects corporate cash flow toward investment," the report said.

 

"Collectively, these forces represent a systemic transfer of wealth from corporate profits to workers, suppliers, governments, and infrastructure investors," it added.

 

Of the total cost, the report stated, two-thirds will be passed on to the consumers via higher prices, while one-third ($315 billion) is absorbed internally through lower earnings.

 

“With real output declining, consumers are paying more for less, suggesting that this two-thirds share represents a lower bound on their true burden,” the report said. 

 

Trump-appointed Federal Reserve Governor Christopher Waller recently said tariffs have had modest inflationary effects, mostly impacting high-income households, as their spending accounts for a large share of consumption. Analysts at TS Lombard, however, note a stark divide, with the wealthy largely insulated while lower- and middle-income households face most of the economic strain, reported Fortune.

 

Earlier this year, the Trump administration imposed a 10 per cent duty on all goods entering the US. Subsequently, it also levied reciprocal tariffs on several other countries, including a 50 per cent tariff on India (25 per cent reciprocal and the rest for importing Russian oil).

 

In India, these tariffs are likely to hit several industries, including textiles, diamonds, and seafood, with many seeking export partners in other countries while aiming to boost domestic demand.