US President Donald Trump’s tariffs are expected to be a major contributor to a $1.2 trillion rise in corporate expenses this year, a report said on Monday.
President Trump’s tariffs combined with wage growth, increased energy costs, and rising capital expenditure for AI will lead to this trillion-dollar increase in corporate expenses in 2025, much of which is being passed on to consumers through hiked prices of products, according to the report by S&P Global.
S&P revised its expenses forecast released in January based on the analysis of roughly 9,000 public companies. The recent estimate now projects total company expenses for the year will reach $53 trillion, the report said.
The ratings agency indicated that the shock has significantly reduced global corporate margin expectations, with sell-side analysts for major retailers including Walmart, Amazon and Costco Wholesalers projecting a total of $907 billion in lost profit.
Approximately two-thirds of this lost profit, or $592 billion, has been passed to consumers via higher prices, while the remaining $315 billion has impacted company earnings.
The study also found expense increases of $155 billion for “uncovered public firms” and $123 billion for private equity- and venture capital-backed firms, totalling an incremental cost of $1.2 trillion.
The report also added that the tariffs have led to a decline in “real output” as production of goods decreases.
A debate had arisen in the US regarding who bears the brunt of tariff-driven price hikes. President Trump-appointed Fed Governor Christopher Waller said that the effects of tariffs on inflation have been modest and primarily affect higher-income households. Other analysts, however, argued that lower- and middle-income families bear the greatest burden.
Earlier this month, President Trump denounced China’s export control move and threatened to call off the planned meeting with Chinese President Xi Jinping.
He also announced plans to impose an additional 100 per cent tariff on Chinese goods, starting November 1, but later softened his tone, calling the tariffs unsustainable.
