The Impact of Tariffs Across the US Supply Chain

The impact of US tariffs is being felt across multiple sectors, with companies scaling back forecasts, raising prices and warning of future uncertainty.

Earnings reports this season are dominated by references to trade tensions, supply chain disruption and the rising cost of doing business.

The International Monetary Fund (IMF) warns that the US will be the hardest hit of any advanced economy, with EV giant Tesla, airlines and consumer brands already feeling the strain.

A reduction in earnings across manufacturing

It’s not just one sector feeling the pinch – every industry, from fizzy drinks makers to airlines, is facing the effects of US tariffs.

For companies listed on the S&P 500, tariffs are the primary concern this earnings season. A Reuters review shows that more than 90% of companies reporting so far have mentioned tariffs in their Q1 earnings updates.

The numbers reveal the impact as PepsiCo revises its full-year profit outlook, now expecting earnings per share to remain flat compared to last year. This is a downgrade from its earlier estimate of a nearly 5% rise.

Meanwhile Merck, a major pharmaceutical firm, has cut its 2025 guidance, citing an additional US$200m in costs this year, with tariffs contributing to the increase.

Chipotle is also feeling the pressure. Despite the popularity of its new Honey Chicken, the company has scaled back its sales growth forecast, acknowledging broader market pressures.

Airlines are pulling their projections entirely. American Airlines, Delta and Southwest have all backed away from their earlier forecasts, citing uncertainty in travel demand.

American’s CEO Robert Isom explains: “Aircraft cost too much already and I don’t want to pay any more." 

For consumers, this means higher prices. Procter & Gamble warns of further price hikes on top of the 1% increase it already introduced earlier this year. The company, which owns brands like Pampers and Tide Pods, estimates that tariffs could add as much as US$1.5bn in annual costs.

Nestlé, Hasbro and Unilever all highlight similar pressures, with Hasbro especially vulnerable due to its reliance on Chinese factories.

Not every business is being hit, however. Comcast reports no impact so far from tariffs, providing a rare exception in an otherwise challenging earnings season.

Tesla revenue drops amid supply chain stress

Tesla’s Q1 earnings offer no respite either. The EV maker reports revenue falling short by US$2bn against projections. Automotive revenue alone is down 20% year-on-year, with reduced vehicle deliveries a central issue.

Tesla attributes much of this to the current trade environment. In its report, the company writes: "Uncertainty in the automotive and energy markets continues to increase as rapidly-evolving trade policy adversely impacts the global supply chain and cost structure of Tesla and our peers."

It also warns that “political sentiment” could affect demand for its vehicles going forward.

Founder and CEO Elon Musk – usually aligned with US President Donald Trump – steps away from the administration’s stance here.

He points out that the tariffs’ “cost impact” is “not trivial", a notable remark given that Tesla sources only 70% of its Model Y parts from the US. With a 25% tariff imposed on cars and car parts, Tesla faces steep added costs for the remaining components it imports from abroad.

The company expects these tariffs to affect future quarters too, as the trade environment remains unpredictable.

IMF slashes growth forecast

The IMF provides a sobering outlook. Its updated report states that the US faces the steepest growth downgrade among advanced economies, with projected growth now at 1.8%, down from 2.7%.

It directly links tariffs and related uncertainty as key factors in what it describes as a “significant slowdown.”

The report goes further, suggesting a 40% chance the US could slip into recession. Other economies are also affected, with Canada, Germany, France, Italy, Japan and the UK all seeing their forecasts reduced.

The White House has not responded to the IMF’s analysis. Instead, press secretary Karoline Leavitt tells reporters that 18 trade deal proposals are active and that more talks are under way.

Whatever optimism remains, the current message from businesses is clear: trade policy is causing significant issues and the costs are rapidly spreading throughout supply chains.

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