AutoZone's Warning About Donald Trump's Tariffs Is Concerning

Consumers and economists alike are concerned (and with good reason) about many of the financial implications of Donald Trump's second term. Chief among the promised economic policies that could spell trouble for consumers is Trump's insistence on wide sweeping tariffs. These tariffs on imported goods could end up not only costing consumers more money immediately but also negatively impacting the country's inflation rate long-term. As companies brace for the financial hit to their bottom lines, many are contemplating price hikes.

Despite the fact that Trump's tariffs are meant to encourage domestic production, the globalization of the supply chain has made the issue far more complicated. For many companies, rather than spend the money, time, and energy to move their production domestically (or, in many cases, to another foreign country with lower imposed tariffs) it is easier to simply pass the tariff costs directly onto the consumer. In fact, many popular U.S. retailers have already publicly stated they would do exactly that.

During a September 2024 earnings call, Philip Daniele, the CEO of AutoZone stated, "If we get tariffs, we will pass those tariff costs back to the consumer." As if this wasn't already concerning enough, to make matters even worse for consumers, AutoZone (along with several other companies) is set to raise prices before Trump's proposed tariffs even take effect. As companies grow more concerned with their profit margins in 2025, consumers should expect a rise in prices across goods and services.

It's worth noting this isn't the first time that Donald Trump has pushed tariffs as part of his economic policy. During his first term, he imposed 30% to 50% tariffs on imported goods from China which led to retaliatory tariffs and the start of a trade war that has continued since. By the end of 2019 these tariffs were estimated to be costing the average American household an additional $460 a year, according to an analysis from economists at University College London and the London School of Economics. However, for Trump's second term he has proposed even more wide reaching tariffs. Not only has Trump proposed a blanket 20% tariff on all imported goods (regardless of the country of origin) but he has also proposed raising the existing duties levied on China up to 60%. Plus, he has promised to impose a 25% tariff on goods from U.S. neighbors Mexico and Canada.

According to research from the Peterson Institute for International Economics, Trump's second term tariff proposals could end up costing the average U.S. household more than $2,600 a year. It's worth noting that consumers might not see price increases all at once. Large corporations like Walmart and Target are generally better able to keep prices more steady (and absorb more costs) given their negotiating power with suppliers and the sheer scale of their orders. However, small businesses, which generally operate on narrow margins, have fundamentally less room to absorb additional costs without passing them on to consumers.

For those that might think they won't be affected by tariffs due to not planning on any large electronic or appliance purchases, it's important to realize that AutoZone is not alone in deciding to increase prices ahead of Donald Trump's inauguration. Timothy Boyle, CEO of Columbia Sportswear, has already stated that his company will also begin raising prices ahead of the proposed tariffs. In October 2024, he explained to the Washington Post, "We're buying stuff today for delivery next fall. So we're just going to deal with it and we'll just raise the prices." He not only echoed the sentiments of the AutoZone CEO, but also added, "It's going to be very, very difficult to keep products affordable for Americans."

According to a report from the National Retail Federation, Trump's proposed tariffs will massively affect the spending power of U.S. consumers. When looking at just six product categories (Apparel, Toys, Furniture, Household Appliances, Footwear and Travel Goods) they found that consumers' spending power would be reduced by $46 billion every single year that the tariffs remain in place. They also estimated that consumers would spend between $13.9 billion and $24 billion more every year on apparel purchases, $8.8 billion to $14.2 billion more for toys, $8.5 billion to $13.1 billion more for furniture, and $6.4 billion to $10.9 billion more for household appliances. The scale and level of tariffs that Trump has proposed are almost guaranteed to exceed the amount that even the largest retailers in the country could financially absorb, ensuring higher prices.