The big picture: President Trump's long-feared tariffs on Mexican, Canadian, and Chinese imports have finally arrived. As retaliatory tariffs from the affected countries launch a trade war that could severely slow the global economy, retail executives warn consumers to expect price hikes.
The Trump administration enacted a 25 percent tariff on imported goods from Mexico and Canada on Tuesday. Furthermore, the 10 percent tariff imposed on Chinese goods last month has increased to 20 percent, sparking fears of higher consumer electronics prices.
Despite a recent positive financial report, Best Buy's stock plummeted by 13.3 percent following the news, signaling anxiety regarding consumer spending. CEO Corie Barry admitted that China and Mexico are the retailer's two biggest sources and predicted that vendors would pass the new duties on to consumers.
Best Buy is one of the largest sellers of products like game consoles, PCs, and PC components, so the tariffs could substantially impact hardware prices. Graphics cards are already unusually expensive, as MSRP listings for Nvidia's RTX 50 series products are more of a hope than a reality. Still, users planning to upgrade their electronics should consider doing so sooner rather than later.
Target also warned of rising prices following the new tariffs. Although the company's stock didn't suffer as much as Best Buy's, it still fell three percent despite recently performing above Wall Street's estimates.
CEO Brian Cornell told CNBC that food prices could rise within days. Although the retailer's hardware market footprint isn't as large as Best Buy's, it could contribute to a broader trend of higher prices for PCs, mobile devices, game consoles, and other products. Acer has already confirmed it will raise laptop prices by 10 percent.
The Trump Administration initially levied 10 percent tariffs on Chinese goods last month while delaying the Mexican and Canadian tariffs to Tuesday. According to prior reports, tariffs on Chinese imports could still rise to 60 or possibly 100 percent, potentially adding hundreds of dollars to the prices of game consoles or laptops.
China retaliated with 10 to 15 percent duties on fuel and agricultural equipment, and Canada plans to respond to Tuesday's tariffs with a 25 percent tax amounting to over $100 billion within the next 21 days. Mexico also confirmed plans for new tariffs without specifying further.
President Donald Trump claims the US tariffs will increase manufacturing in the US. While some companies responded by announcing increased investments in the country, it's difficult to determine when these investments will bear fruit, and they might not decrease consumer prices.
Apple plans to invest around $500 billion in stateside manufacturing, and HP recently announced plans to move most of its North American manufacturing away from China by the end of this fiscal year. TSMC accelerated its plans for 3nm semiconductor production in Arizona and will spend $100 billion on five new fabs there. However, the deal might not stop incoming tariffs on Taiwanese chips. The company could raise wafer costs by 15 percent in response.
Best Buy and Target brace for price hikes as Trump's tariffs take effect
