Study: Tariffs to cost companies $1.2T this year, mostly hitting consumers

A new S&P Global study projects that former President Trump's tariffs will impose over $1.2 trillion in additional costs on businesses in 2025, with at least two-thirds of this burden expected to be passed on to consumers and the remainder absorbed by companies. This conservative estimate, based on data from 9,000 companies, highlights a systemic transfer of wealth from corporate profits due to trade barriers and the recent suspension of the 'de minimis rule,' effectively offsetting AI-driven margin improvements amid re-escalated trade tensions with China.

Analysis

S&P Global's recent study projects that former President Trump's tariffs will impose over $1.2 trillion in additional expenses on businesses in 2025, a conservative estimate derived from 9,000 companies. This substantial cost burden is expected to see at least two-thirds passed directly to consumers, with the remainder absorbed by corporate profits. This highlights a significant and broad-based "expense shock" impacting the U.S. economy.

The report attributes this systemic transfer of wealth from corporate profits to factors including tariffs, trade barriers acting as supply chain taxes, and compounding logistics delays and freight costs. The recent suspension of the "de minimis rule," which previously exempted low-value imports, is identified as a clear inflection point in global trade costs, intensifying the financial pressure on companies.

While AI advancements have positively influenced profit margins this year, the study explicitly notes that these tariff-related costs have effectively "pulled them down," neutralizing potential gains. This economic pressure is set against a backdrop of re-escalated trade tensions with China, suggesting ongoing policy-driven headwinds for corporate profitability and consumer spending.

Key Decisions for Investors

• Monitor corporate earnings reports closely for explicit mentions of tariff-related cost absorption and margin compression, particularly in sectors heavily reliant on global supply chains.
• Evaluate consumer discretionary spending trends and inflation data, as the projected passing of two-thirds of tariff costs to consumers could dampen demand and purchasing power.
• Assess companies' supply chain resilience and diversification strategies, as firms with less exposure to tariff-affected imports or more robust domestic sourcing may exhibit greater stability.
• Consider the potential for continued trade policy volatility, especially given re-escalated tensions and upcoming political cycles, which could introduce further uncertainty and cost pressures.