HP Inc (HPQ) saw its stock price plummet 9.25% in pre-market trading on Thursday, as investors reacted to the Trump administration's announcement of sweeping new tariffs that are set to significantly impact the PC and tech hardware industry. The sharp decline comes as a direct response to the imposition of a 25% tariff on imports, which is expected to have substantial consequences for manufacturers heavily reliant on global supply chains.
The new tariffs, unveiled by President Trump, are particularly concerning for companies like HP Inc, which relies heavily on China and other Asian countries for component sourcing and manufacturing. The Trump administration plans to hit China with a reciprocal tariff of 34%, on top of the 20% that is already in place. This move is expected to raise material costs significantly, potentially forcing HP and other PC makers to increase consumer prices or face reduced profit margins.
Industry analysts are projecting substantial cost increases for PC manufacturers. J.P. Morgan estimates an average 5% price increase across hardware to offset tariff-related headwinds on margins, with PC manufacturers facing the highest increases. Some experts suggest that companies like HP could face 10% to 25% cost increases, adding $200-$500 per unit to production costs. This could lead to trimmed feature sets and pricing pressure, especially in mid-range PC segments.
While HP has been proactively working to mitigate the impact of tariffs by diversifying its supply chain, the company still faces significant challenges. HP CEO Enrique Lores previously stated that price increases on products would be a last resort, but some targeted increases were assumed as part of their guidance. By the end of its current fiscal year, HP aims to have more than 90% of its products sold in North America built outside of China. However, the breadth and severity of the new tariffs may complicate these efforts and put additional pressure on the company's operations and financial performance.
