More than half of U.S. companies (57%) reported declining gross margins as a direct result of tariffs, according to the new KPMG Tariff Pulse Survey.
As tariffs continue to reshape the global trade landscape, American businesses are already feeling “negative impacts, while anticipating that they may experience more price increases in the near future, according to the report.
The survey is in juxtaposition to positive reports emanating from the Trump administration and from other tariff proponents, which claim that federal revenue has increased while inflation has not increased as anticipated.
Of course, these macro views do not reflect more micro developments, as specific industries and sectors will probably struggle more than others depending on sourcing.
The KMPG report states that international sales are being hit hard, particularly in China, where 83% of companies report reduced sales due to retaliatory tariffs.”
Nearly a third have seen a “16-25% drop in foreign sales overall, underscoring the wide-reaching impact of current trade tensions.”
To manage the immediate cost pressure, companies “are aggressively leveraging various tariff mitigation strategies, focusing on customs valuation, origin determination, and duty deferment.”
Many are also engaging in forceful negotiations “with suppliers, some of whom are agreeing to share the costs associated with tariffs.”
83% of companies expect to “raise prices in the next six months, with nearly three quarters already passing on some costs to customers.”
However, customer pushbacks at this time remain “limited with only about one-third of businesses reporting it as a challenge.”
Brian Higgins, Advisory Partner, Industrial Manufacturing, KPMG US, claims the full impact on consumers are likely still to come.
Tariffs are forcing companies to “rethink their supply chains and investment timelines, but strategic change takes time.”
Nearly half of businesses reported it “takes 7 to 12 months to implement significant supply chain adjustments, and more than half are already working to reconfigure their supply chains in response, including reshoring manufacturing to the U.S.”
However, higher labor and operating costs, “along with the capital required to make these moves, remain major barriers.”
In fact, many companies have delayed capital investments “by up to a year while they reassess long-term strategies in an increasingly uncertain trade environment.”
Over two-thirds are using predictive analytics, and “nearly half have automated manufacturing processes as a strategic response to tariff-related challenges.”
The survey captured perspectives from “300 U.S.-based C-suite and business leaders representing organizations with an annual revenue of $1 billion or more.”