Aug 14, 2025
While some U.S. companies are taking the President’s advice to “eat the cost” of the tariffs, forecasters doubt that corporations will want to keep on sacrificing profits for much longer.
In July, General Motors reported that they lost more than $1.1 billion in order to absorb tariff costs. On the other hand, Nike is planning price hikes to offset their projected increased costs of $1 billion due to tariffs on their offshore production. Most other retailers are also planning on passing off the new cost of doing business to their consumers.
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Coupled with this, the dollar is taking a hit. The dollar is down -8.87% so far this year, with economists projecting more dips to come.
So what does this mean for American consumers and small businesses? Here’s what you can expect — and how to prepare as the economy continues to roil under the impact of the tariffs.
The tariff dream — and the reality
“The top-down macro evidence seems clear: Americans are mostly paying for the tariffs,” said George Saravelos, global head of FX research at Deutsche Bank. “There is likely more pressure on US consumer prices in the pipeline.”
Initially, the President insisted that tariffs would make prices fall and improve the economy. At a rally after his inauguration, he said, "I always say 'tariffs' is the most beautiful word to me in the dictionary. Because tariffs are going to make us rich as hell. It's going to bring our country's businesses back that left us."
However, companies that rely on offshore products and production cannot charge so quickly. In spite of the President’s promise that “The country will be making a fortune”, CNN reports that all the tariffs averaged now put the U.S. at an effective tariff rate of 22.8%, the highest of any developed country in the world. Trade has slowed significantly, and economists warn that warehoused goods that were bought ahead of tariffs will run out. Will businesses now import goods at more than double the cost? Economists say stores are more likely to leave their shelves empty.
The double whammy of higher prices and reduced availability of products is likely to hit U.S. shoppers hard.
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The impact on trade partners
“With little relief on import prices, domestic firms are stomaching the cost of higher tariffs and starting to pass it on to consumers,” Wells Fargo economists Sarah House and Nicole Cervi said in July.
However, there are some foreign suppliers absorbing part of the cost of tariffs. CNN reports that export prices in Japan have shrunk for three straight months, and Japanese automakers have reduced prices on cars exported to the U.S. by a record amount.
For other foreign companies, however, the decreased value of the U.S. dollar has caused them to raise prices to ensure they’re getting the full value of their provided goods and services. Deutschbank reported that the U.S. dollar is off to its worst start to a year since the 1970s, so the cost of doing business will likely continue to increase. Margins are also plummeting for U.S. businesses according to the producer price index.
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“If consumers and foreign firms are not bearing tariff costs, domestic firms are. That is something that eventually should be reflected in corporate earnings announcements,” said Citigroup chief U.S. economist Andrew Hollenhorst in July.
How to make the best of tariffs prices
With more price hikes to come, economists warn that now is the time to avoid impulse purchases. Mark Hamrick, a senior economic analyst at Bankrate, said, “I see people going to places like Costco and emerging with shopping carts full of things and I wonder to myself, ‘how much are they really saving and are their emergency savings really adequate?’ The notion of ‘saving money’ through purchasing is really a flawed concept in some cases.”
Instead, Bankrate advises consumers to think twice before they make any big-ticket purchases, and try to make do with what they have. In terms of stocking up at big box stores, economists also advise Americans to focus instead on their financial goals. While stocking up may feel smart in the short term, it’s wiser to use that money instead to pay down debt or build up your emergency fund.
In terms of your regular purchases, be mindful of your spending and do your best to comparison shop. Christine Benz, director of personal finance and retirement planning for MorningStar said, “Many households have been thrust into the question of, ‘Well, if we usually have eggs for breakfast, what do we have instead?’ Just make sure you’re not automatically reaching for goods that have seen dramatic escalations in price and be mindful about the trade-offs that you’re willing to make.”
She advises comparing your current grocery costs with your standard bill from a year ago, and seeing if substitutions are in order.
For small business owners, the cost of tariffs may be harder to avoid. It’s time to have an in-depth look at your supply chain, and find out if you can source your materials from other suppliers. Look for a local solution where possible.
You may also consider any operational cuts that you can put in place. Look for efficiencies to cut costs, so that you can continue to keep your margins strong. If you have to raise prices, be upfront with your customers about the impact tariffs are having on your business, and emphasize the quality of your products or their unique features as reasons to keep buying.
Finally, it may be worth investing in professional advice to navigate this new mode of doing business. You may be able to find a free or low-cost community mentorship program for small business owners to get the advice and support you’re looking for.
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Rebecca Holland is dedicated to creating clear, accessible advice for readers navigating the complexities of money management, investing and financial planning. Her work has been featured in respected publications including the Financial Post, The Globe & Mail, and the Edmonton Journal.
