Trump tariffs fall, but trade war impacts linger

A year after President Donald Trump declared his “liberation day” and imposed sweeping tariffs on imports, kicking off a wave of economic and political uncertainty, some companies are still feeling the effects.

While some industries have emerged largely unscathed — having weathered twists and turns of several tariff iterations — others, such as retail, automotive, consumer packaged goods and pharmaceuticals, are navigating a new reality in global supply chains.

“Leadership at U.S. corporations really had to think about where we buy from versus whether we can import or not,” said Venky Ramesh, a supply chain expert with AlixPartners. “Around 80% to 85% of the costs were absorbed domestically, meaning either the U.S. corporations had to take the hit, or they passed it on to the customers, or a mix of both.”

On April 2, 2025, in the White House’s Rose Garden, Trump announced broad country-by-country tariffs, as well as a 10% baseline levy on countries that weren’t specifically listed in that declaration. Those tariff policies fluctuated wildly over the following months as Trump made deals and walked back some of the most extreme duties.

With ever-changing trade and tariff policies, companies have been forced to be more flexible and diversify their supply chains over the past year. Moving operations out of countries such as China, Vietnam or Mexico meant import cost savings, but for many industries, it was a tall task.

Ramesh said he saw clients in the first few months making “aggressive” changes to get ahead of the tariff costs, but because those policies kept shifting, companies begin to move slower and invest resources into scenario modeling.

“Moving supplier bases cannot happen overnight,” Ramesh said. “I think what companies are doing is they’re taking it gradually, so they want to make sure that they are well-diversified.”

On Feb. 20, the Supreme Court ruled that the country-specific “reciprocal” tariffs Trump imposed under the International Emergency Economic Powers Act of 1977, or IEEPA, were unconstitutional. But hours after the ruling, Trump announced a new “global tariff” rate of 10% under a separate statute, Section 122 of the Trade Act of 1974, for a period of 150 days. He later said he would increase global tariffs to 15%.

Meanwhile, those imposed under Section 232 of the Trade Expansion Act of 1962 — intended to target specific imports that threaten national security — remain in place. Section 232 tariffs largely affected imports of steel, semiconductors, aluminum and other products.

Still, Ramesh said, overall imports into the U.S. in 2025 were actually higher than in the previous year, especially as companies pulled forward inventory in the first few months of the year.

Ultimately, he said, he believes the past year of tariffs has culturally shifted the way U.S. companies operate.

“The things that would stick are supply chain being a very, very critical component of any company. I think that has really changed over the last year,” he said. “Corporations are not going to make the rash decisions. They’re not as susceptible to these changes as they were a year ago. They’ve stabilized more.”

As the U.S. enters its second year of Trump-imposed tariffs, here’s how some of the consumer-facing sectors have fared.

One year into Trump’s trade war, the retail industry has been disproportionately affected by tariffs. Mega-retailers such as Walmart, which have a range of different revenue streams and deep negotiating power, have emerged relatively unscathed, while smaller businesses have been crushed.

Several retailers said that although they initially estimated they would see significant hits to revenue and profitability after the new tariffs were imposed, they’ve since taken a new approach, aiming to not rely too heavily on any single country for imports or manufacturing. And, for the most part, they’ve managed to avoid the massive impact that many projected at the start of the trade war.

Home Depot‘s chief financial officer, CFO Richard McPhail, told CNBC in late February that the company is pressing ahead with its goal of limiting any one country outside the U.S. to 10% of the company’s purchases. More than half of what Home Depot sells is sourced in the U.S. 

The retail supply chain has been forced to become more nimble in the past year, according to Max Kahn, the president of Coresight Research.

“One of the things that really started back with the pandemic is that retailers have become much better at building flexibility in their supply chains, and that got accelerated a lot last year with tariffs,” Kahn said. “Shocks to the system or unexpected events are a little bit more business as usual now.”

Tariffs have also meant higher costs for shoppers. Retailers such as Walmart, Best Buy and Macy’s have raised prices of some items, while also looking for ways to defray costs.

But as retailers reported quarterly earnings over the past few months, executives were hesitant to declare victory in the tariff back-and-forth.

While the Supreme Court’s decision earlier this year was largely a boon, especially for apparel companies that rely primarily on supply chains throughout East Asia, there’s still a lot of uncertainty, and companies were mixed on whether, and how, to size up the potential tariff impact.

Abercrombie & Fitch in March decided to explicitly incorporate the latest 15% tariff assumption into its outlook, becoming one of the first retailers to provide clarity on the new guidelines. However, the company did not predict or quantify any potential tariff refunds that it may receive after the IEEPA tariffs were struck down.

On the other hand, American Eagle Outfitters said in March that its guidance for the first quarter and full year was based on tariffs imposed under the IEEPA guidelines and did not take into account the recent Supreme Court ruling. 

Gap also didn’t factor recent changes to tariffs into its 2026 outlook, but it could issue stronger guidance in the upcoming quarter because the newly enacted tariff rate is slightly below the previous rates for many countries.

Dollar Tree, too, isn’t betting on significant savings. CFO Stewart Glendinning said last month that the company already paid tariffs on its current inventory before the Supreme Court ruling.

“While there may be some upside, we remain cautious because of the potential for further near-term changes and because of the potential for negative freight and other costs related to the conflict in the Middle East,” Glendinning said.

His comment underscores a new reality for retailers: The Trump administration’s aggressive tariff policies are now a constant on the long list of factors that make the year ahead hard to predict.

The automotive industry has been, and continues to be, one of those most affected by Trump’s trade and tariff policies.

Both foreign and domestic automakers have faced billions of dollars in additional costs due to the levies. Toyota, for example, forecast a 1.4 trillion yen ($9.5 billion) impact from U.S. tariffs during its fiscal year. And the changes cost Detroit automakers General Motors, Ford Motor and Chrysler parent Stellantis a combined total of $6 billion last year, according to the companies.

Autos have been most affected by Section 232 tariffs, but the impact hasn’t been as bad as initially expected. The Trump administration last year decided to give some reprieve by “de-stacking” tariffs that were piling up on the automotive industry, so companies wouldn’t be paying overlapping duties for parts and vehicles.

“We should end up at a position where our net tariffs are actually lower in 2026 than they were in 2025,” GM CFO Paul Jacobson said Jan. 27, during the company’s most recent quarterly earnings call.

U.S. tariffs cost GM $3.1 billion in 2025, below the company’s previous expectations of between $3.5 billion and $4.5 billion, Jacobson said.

Companies including GM have said they have taken varying actions to offset the additional expenses, including redirecting and resourcing supply chains to better meet U.S. standards.

GM’s chief rival, Ford, told CNBC in February that it is continuing to work with the Trump administration on policies that “promote a strong and globally competitive U.S. auto sector.”

International companies such as Toyota — the world’s largest automaker — and its Japanese peers Nissan Motor and Honda Motor have announced plans to increase domestic manufacturing and export vehicles from the U.S. to Japan to appease the Trump administration.

Most consumer packaged goods companies manufacture their products in the U.S. but import key commodities, such as the pulp found in diapers and toilet paper and the aluminum used for soda and beer cans. Supply chain diversions aren’t an option for those resources, like they are for the retail or auto industries.

While the tariffs broadly resulted in higher costs for these manufacturers, some companies found themselves under unique pressure.

For example, spice maker McCormick initially warned investors that tariffs could cost $70 million in fiscal 2025 as prices for black pepper, cinnamon and vanilla were projected to rise. However, it managed to mitigate the impact of the import duties to just $20 million by cutting expenses, raising prices and sourcing alternatives from lower-tariffed countries when possible.

Consumer packaged goods company Procter & Gamble said in July that it had to raise prices on 25% of its products due in part to a $1 billion total annual tariff impact. Beer maker Constellation Brands said in July that it estimated a $20 million hit to its fiscal 2026 earnings due to tariffs on aluminum, a crucial material for its cans.

“At these rates, tariffs alone are a 5-point headwind to core EPS growth in fiscal 2026,” Procter & Gamble CFO Andre Schulten said on a July earnings call, referring to earnings per share. “We will look for every opportunity to mitigate these impacts, including sourcing flexibility, productivity improvements, and pricing with innovation in affected categories and markets.”

But not all consumer companies chose to pass on higher costs to consumers.

J.M. Smucker, which owns Folgers and Cafe Bustelo, originally planned to hike prices on its packaged coffee in response to the tariffs — the third increase for that fiscal year after a tough harvest. But the company reversed those plans and instead absorbed the $75 million hit to its margins.

Smucker executives cited an executive order that excluded green coffee and other agricultural products as one reason for the decision.

The pharmaceutical industry has fared better than some industries, thanks to recent drug pricing agreements with Trump.

Since November, more than a dozen major drugmakers have signed landmark deals with Trump to lower the prices of new and existing medicines. The drugmakers include several U.S.-based companies such as Pfizer, Eli Lilly, Merck, Gilead and Bristol Myers Squibb, as well as companies based abroad, including Novo Nordisk, GSK and Novartis.

On Thursday, the Trump administration said 13 companies have already signed those deals, and negotiations are progressing with four others.

Those agreements are part of the president’s so-called “most favored nation” policy, which ties U.S. drug prices to cheaper ones abroad. In exchange for the price cuts, Trump awarded the companies a three-year exemption from pharmaceutical tariffs, as long as they invest further in U.S. manufacturing.

The president on Thursday imposed new tariffs on branded drugs from drugmakers that did not strike deals with the administration, but that long-awaited move will likely affect only a small number of companies.

Patented medications and their active ingredients would be hit with a 100% tariff, but there are pathways for exemptions. The administration will impose a 20% tariff on companies that plan to onshore production, increasing to 100% four years from now, it said this week.

Months before the deals with Trump, tariff threats — and efforts to get into the president’s good graces — fueled a new wave of U.S. manufacturing investments from the pharmaceutical industry after years of domestic drug manufacturing shrinking.

AbbVie, for example, said last April that it will put more than $10 billion into U.S. manufacturing and other capabilities over the next decade, including building four new plants. Johnson & Johnson in March 2025 said it will spend more than $55 billion to build four plants in the U.S.

— CNBC’s Gabrielle Fonrouge, Melissa Repko, Michael Wayland, Amelia Lucas and Annika Kim Constantino contributed to this report.