By Theo Francis, Inti Pacheco and Alistair MacDonald
President Trump told the world the new price for doing business in America. And it was steep.
As details of the new tariffs spread by text messages and tweets, executives and investors realized that Trump's tariff threats were becoming a harsh reality.
Restoration Hardware Chief Executive Officer Gary Friedman was on a call with analysts Wednesday afternoon talking about the furniture retailer's strategy and how the housing market could slow in this economic environment when news of the tariffs broke. He asked colleagues to get a "live read" of his business to check how the company's stock was doing.
"Oh, really? Oh, shit, OK," Friedman said in the moment. "Everybody can see in our 10-K where we're sourcing from so it's not a secret."
More than 70% of the furniture company's products come from Asia, according to its annual report, including 35% from Vietnam and 23% from China, where steep new duties were put in place. Shares of Restoration Hardware were down 44% by midday Thursday.
The stock prices of some of America's best-known businesses, from Nike to General Motors , sold off on fears that new trade barriers would swallow their profits and drive up prices to levels that would sap demand for their products. The market values of Apple, Nvidia, Amazon and Meta, four hard-hit stocks, lost $742 billion combined. Jeep-maker Stellantis, which also owns the Chrysler and Dodge brands, said it would immediately halt auto production at some Canadian and Mexican plants.
Wall Street bankers and business leaders have spent weeks trying to understand -- and shape -- Trump's ever-shifting tariff plans. Many also believed -- as they were reassured by some in Trump's inner circle -- that the potential levies were negotiating tactics the businessman-turned-politician would use to extract concessions from trading partners and adversaries.
Instead, Trump unveiled 10% across-the-board tariffs, and even higher levies on a swath of countries including Japan, Europe, South Korea and Vietnam. The new levies on China will push up the costs of many goods from that country -- from toothbrushes to televisions -- by more than 50%. The 10% tariffs kick in on April 5 and the higher rates on April 9.
The global market reaction was swift. U.S. stocks tumbled Thursday, with the Dow industrials falling 1,300 points, the Nasdaq plunging 5% and the S&P 500 sliding 4%. The U.S. dollar slumped as investors retreated to the euro and Japanese yen.
Many CEOs of major publicly traded companies were silent Thursday. The Business Roundtable, which represents 200 heads of U.S. companies across sectors, said in the wake of Trump's announcement that universal tariffs run the risk of causing major harm to American manufacturers, families, workers and exporters.
"Damage to the U.S. economy will increase the longer the tariffs are in place," a statement from the group said. "We urge the Administration and our top trading partners to swiftly reach agreements that level the playing field for American goods and services and remove these tariffs."
News of the tariffs reverberated across Europe and Asia, from German car giants to Swiss watchmakers. Analysts at UBS think prices of luxury goods will go up 6% on average in the U.S., but a wider worry is that a trade war could tamp down demand in China. Together American and Chinese shoppers drive more than half of global luxury sales.
China called the tariffs "unilateral bullying" and pledged to retaliate, while other countries struck a more cautious tone. Australian Prime Minister Anthony Albanese said his government will try to negotiate to remove the tariffs, but won't join a "race to the bottom" by retaliating. India's Trade Ministry, too, said it had no plans to immediately retaliate.
Dramatic impact
Brian Riley, CEO of Guardian Bikes, was among the guests at the Rose Garden where Trump unveiled his sweeping new tariff plan, one of the few business leaders sitting alongside auto workers and steelworkers. He said he welcomed the tariffs, even though they will squeeze his business this year.
Guardian moved production of its children's bicycles in 2022 from China to Seymour, Ind. While 90% of the components are imported from China, Riley had already put in place a plan to reduce that number to about 20% by the end of next year.
The tariffs provide incentive for Guardian to expand capacity at its Seymour facility and invest in building out the bicycle supply chain in the U.S. Trump's agenda "is a welcome departure from a trade and economic policy that prioritized offshoring production and cheap consumption," Riley said.
The mood was less joyous at Pulsar Products, a Cleveland supplier of stationery, novelty items and souvenirs. Employees held a "watch party" in the company's boardroom to listen to Trump's "Liberation Day" announcement on a big-screen TV.
"As I looked around, I sensed a feeling of nausea," said Pulsar CEO Eric Ludwig.
Employees are concerned not just with the impact on Pulsar, but also with what tariffs mean for their own wallets and the American people. "We are thinking our clothes are going to cost more," he said. "Everything is going to jump."
Pulsar has reduced the share of its supply coming from China to 50% from 80% over the last two years by moving some sourcing to Vietnam. One Pulsar employee is currently in Vietnam checking on production for the busy back-to-school season, set to arrive at U.S. retailers in July. Such shipments from Vietnam now face 46% tariffs.
Ludwig said he was hoping to hear the president offer tax credits or some other relief to help small businesses like his 36-person company through the tough adjustment period. The size of the new tariffs is the same for big companies and small businesses, "but the impact on smaller companies is bigger," he said.
"We knew something would happen, but we didn't know how dramatic the impact would be," he said.
Complicated plans
Victor Yarbrough, CEO at Brough Brothers Distillery in Louisville, Ky., was left wondering what retaliatory tariffs would bring. He recently invested in an expansion, with a strategy to send his excess spirits overseas. The tariffs complicate those plans.
"We are certain the EU is going to retaliate," said Yarbrough. He also wondered how much money U.S. consumers would have to spend on his bourbon or rum if everything else gets more expensive. "It boils down to how much disposable income does one family have?" he said.
For booze giant Diageo, there was some relief after the White House kept duty-free access to the U.S. for products compliant with the U.S.-Mexico-Canada Agreement. It had feared some of its bestselling brands in the U.S. -- like Don Julio tequila from Mexico and Canadian whisky Crown Royal -- could be hit by new levies, potentially hitting its operating profit by tens of millions of dollars a month.
While Trump wants to encourage foreign manufacturers to beat the tariffs by establishing production in the U.S., many simply can't. Europe's giant food and drink industry, for example, trades on its regional heritage and ingredients. Scotch and Irish whisky must be produced in Scotland and Ireland.
The U.S. is Scotch whisky's biggest customer, buying over 20% of all exports last year, in a trade worth almost $1.3 billion.
Harry Tayler, co-founder of Scotch brand Wolfburn, watched on YouTube from his vacation in Cape Town as Trump hit British imports with a 10% tariff. He plans for the company and its U.S. distributor to absorb the cost.
"Our profits will end up in the pocket of the U.S. government," he said.
Still, Tayler sees a potential upside. The higher tariffs placed on imports from Ireland and Japan, at 20% and 24% respectively, means that Scotch may become more competitive and eat into the market share of two highly competitive rivals.
Unintended consequences
For Wisconsin-based Husco, which makes engines and parts for automakers and other manufacturers, the problem was the magnitude of Trump's tariffs.
"If there had been a 5% tariff, we could have worked through it -- maybe absorbing it, maybe sharing some of it with our suppliers," said Austin Ramirez, the company's CEO.
Husco has revenues of about $500 million and three factories in the U.S., as well as plants in India, China and Europe, which mostly produce for those regions.
Instead of boosting U.S. production as the Trump administration hopes, the new tariffs are likely to lead Husco to shift some production out of its U.S. factories. The new tariffs mean it will no longer be cost-effective to import components to make products for export.
"It doesn't make any sense to do that, I'm going to have to make those products in another part of the world," Ramirez said.
It would take years for any domestic alternatives for the components he imports to develop, he added: "To reboot that sort of manufacturing here is going to take huge investment in plants and equipment -- but also, we don't have people who want to do that sort of work."
Write to Theo Francis at theo.francis@wsj.com, Krystal Hur at krystal.hur@wsj.com and Alistair MacDonald at Alistair.Macdonald@wsj.com
(END) Dow Jones Newswires
April 03, 2025 15:14 ET (19:14 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.
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