Many U.S. companies have sought to reassure investors that tariffs are “manageable,” but comments early in earnings season suggest profit margins are at risk as consumers balk at high prices.
Leading companies such as Procter & Gamble, Fastenal, and 3M are warning of this challenge.
Andy Jassy, CEO of retail giant Amazon.com, told CNBC on the sidelines of the World Economic Forum in Davos, Switzerland, that he is seeing prices on his e-commerce platform rise as sellers use up the inventory they brought in for upfront tariffs.
A number of companies with global reach will report results next week, including General Motors, Caterpillar, Colgate-Palmolive and packaging supplies company Kimberly-Clark.
While broad consumer spending is holding up, buyers are smart and often looking for good value, especially those with low and middle incomes.
Brian Jacobsen, chief economic strategist at Annex Wealth Management, said: “While some consumers are less price sensitive than others, most consumers are still angry about current price levels and do not favor further price increases.”
Increase in “surgical” prices
More than 100 S&P 500 companies are scheduled to report next week, according to LSEG data.
Garden and farm equipment retailer Tractor Supply expects to see tariff-related price increases this year, according to a memo from brokerage Telsey Advisory Group.
Tractor Supply reported earnings Thursday, with executives saying consumers have been shopping with value in mind over the past year and price increases will be “drastic.”
Levi Strauss will report its holiday quarterly results on Wednesday. In October, the company announced that tariffs would reduce its profit margin by 0.7%, up from its previous forecast of 0.5%. Levi Strauss raised some prices as it sought to diversify its supply chain, but also warned of a softening consumer environment.
Harvard professors Alberto Cavallo, Paola Lamas, and Franco Vazquez track the prices of about 360,000 products, from carpets to coffee, at major online and brick-and-mortar retailers in the United States.
They estimate that at the end of the year, prices for domestic goods were about 4.3 percentage points higher than expected under the pre-tariff regime, and prices for imported goods were about 5.8 percentage points higher.
Some companies, including spice maker McCormick & Co., are raising prices after tariff costs rose more than expected in the fourth quarter.
“Approximately 50% of additional tariffs on McCormick products remain in place and we continue to face associated inflationary pressures,” Chief Executive Brendan Foley said. McCormick’s gross profit margin decreased approximately 130 basis points compared to the same period last year.
Consumer goods giant Procter & Gamble has raised some prices by 2% to 2.5% in the United States, its largest market, to offset tariffs and sluggish sales. The company reported last week that its profit margins have declined for the fifth consecutive quarter.
How do consumers feel?
Industrial goods distributor Fastenal also said the tariffs had pushed up prices and hurt demand. Max Tunnicliffe, Fastenal’s chief financial officer, said the company would “make further pricing decisions” in 2026, but that would depend on input costs and customer behavior.
As of mid-November, the effective tariff rate for U.S. consumers, which takes into account substitute products, was 14.4%, the highest in 85 years, according to the Yale Budget Institute.
If the U.S. Supreme Court rules in February against President Donald Trump’s use of the International Emergency Economic Powers Act (IEEPA) to enforce existing tariffs, the current tariff regime could be suspended and open the door to large refunds for companies that paid tariffs under President Trump’s emergency powers regime.
But that process could take years, during which the White House plans to use other tariff powers to maintain import tariffs.
“For the last eight months, everyone has been grappling with how to navigate the new trade environment,” said General Electric CEO Larry Culp.
(Reporting by Juveria Tabassum in Bengaluru; Additional reporting by Rajesh Kumar Singh in Chicago; Editing by David Gaffen and Tasim Zahid)
