Products and companies most at risk

Many of the items that U.S. shoppers browse and buy in retailers’ aisles come from far-away factories or farms — a reality that could soon force many consumers to change their buying habits.

Sneakers, T-shirts, beer and other common household items are often made in countries like China, Mexico and Canada before they wind their way to a big-box retailer, grocer or mall in the U.S. That complex global supply chain is front and center Monday as President-elect Donald Trump gets inaugurated and is widely expected to announce new tariffs on imports.

While tariffs have become a familiar concept for more Americans since Trump implemented them on metals and other key materials during his first term in office, the levies he has threatened for his return to the White House could have a much bigger effect on household budgets.

Most people have little grasp of just how many items could see price hikes due to the duties: from avocados to children’s toys, to chocolate and cars, experts told CNBC. Proposed tariffs on products from China, Mexico and Canada — the three largest U.S. trading partners — would likely affect U.S. consumers the most.

The exact details of those tariffs, including which countries would be affected and how high the duties might be, remain unclear and could change. On the campaign trail, Trump spoke about implementing 10% to 20% tariffs on all countries, and putting levies as high as 60% on Chinese goods.

While news reports in recent weeks have suggested Trump could scale back his tariff proposals, and could be using them as a negotiating tactic to bend foreign governments to his will, the president-elect has denied those reports.

Since his first run for president, Trump has argued tariffs will encourage more manufacturing in the U.S. and promote job creation and national security. It’s not just him: President Joe Biden and other Democrats have backed more limited tariffs for the same reasons.

Regardless, the risk is clear for retailers: Any tariffs would bring extra costs they’d have to absorb, share with producers or pass on to customers by charging higher prices — the latter of which is the most likely scenario as the industry is reluctant to sacrifice profits, retail executives and industry experts told CNBC in recent weeks. Major retail trade groups, including the National Retail Federation and Consumer Technology Association, have warned tariffs would effectively become a tax on American businesses and consumers.

Shoppers are already expecting tariffs to hit their pocketbooks. About 67% U.S. adults surveyed said they think it is very likely or somewhat likely that companies will pass on the cost of tariffs to consumers, according to Morning Consult survey of more than 4,400 people in early December. Even so, the same poll found about 45% of adults back a 10% tariff on all imports, and more than a third of respondents support a 20% duty on all goods and a 60% levy on Chinese imports.

Ali Furman, consumer markets industry leader for PwC, said tariffs have become the number one topic of discussion among companies working with the consulting firm, and the conversations have reached the top of the C-suite. She said the tariff fallout could be different now than during Trump’s first term, since his new proposal is broader and comes as retailers struggle to convince inflation-weary consumers to spend.

“It’s not 2017,” she said. “Because there’s a more cost-conscious consumer, you have to be much more thoughtful about passing on those costs to the consumer.”

“At the same time, you don’t want to come across as anti-tariff or anti-American,” she added.

Planning for tariffs now is challenging because companies do not know how Trump will proceed. Automotive executives who have spoken with CNBC in recent weeks said they are preparing for several different scenarios but not making any moves until there’s more clarity.

“We are working, obviously, on scenarios,” Antonio Filosa, head of Stellantis’ North American operations, said. “But yes, we need to await his decisions and after the decision of Mr. Trump and his administration, we will work accordingly.”

Professor Brett House, an economist from Columbia Business School, said just about every consumer product could see a price increase under the proposals, but some companies have higher exposure than others.

“Something around 50% of U.S. petroleum imports come from Canada. The Trump administration puts tariffs on those, it is unequivocally the case that everything in the United States will become substantially more expensive,” House told CNBC in an interview. “The breadth of the impact that we should expect to see from these tariffs could be enormous and could affect every single thing we produce in the United States and every household and every business. No one will be immune.”

Here are just some of the everyday items that would be affected if duties on goods from China, Canada and Mexico take effect.

As of the end of 2023, about 50% of toys from Barbie’s parent company Mattel were made in China, according to CEO Ynon Kreiz. This year, Mattel expects less than 40% of its sourcing to come from China so its “exposure in the U.S. to China sourcing is therefore 20%” given the company’s geographic sales mix, Chief Financial Officer Anthony DiSilvestro said.

“We’ve done a good job mitigating the potential exposure,” DiSilvestro said during a Morgan Stanley retail conference in December. “But to the extent we’re impacted, we would expect to raise prices to offset it.”

Footwear is another industry with a heavy reliance on China. About 37% of footwear imports came from the country in 2023, followed by about 30% from Vietnam, nearly 9% from Italy and 8% from Indonesia, according to data from the U.S. International Trade Commission

Nearly 100% of all footwear is imported to the U.S., according to the group.

Even before Trump’s first term, footwear manufacturers were moving some sourcing out of China as its labor force shrank, the organization’s CEO Matt Priest said. Yet he said it would be unrealistic to return production to the U.S., and moving it to another part of Asia can be difficult.

Already, some companies have accelerated their plans. Steve Madden said in November that it will reduce the goods it imports from China by as much as 45% over the next year.

At a press conference on Thursday, Priest said U.S. footwear companies are waiting for clearer policy.

“All of these actions are inflationary,” he said. “You have to pay the piper somewhere.”

China isn’t a major manufacturer of cosmetics, but E.l.f. Beauty, a drugstore staple and popular brand among younger shoppers, makes about 80% of its makeup in the region.

During an interview with CNBC late last year, CEO Tarang Amin said the company could be forced to raise prices if the tariff hikes take effect — a risky move considering its low prices are one of its main draws.

Wells Fargo estimates that 25% tariffs on Mexico and Canada imports would put most of the adjusted earnings of General Motors, Ford Motor and Stellantis at risk. The firm estimates the impact of 5%, 10% and 25% tariffs to be $13 billion, $25 billion and $56 billion, respectively, across the three companies.

Most notably, GM and Stellantis both have massive plants in Mexico that produce highly profitable full-size pickup trucks. They, along with Ford and others, also have built EVs in Mexico to lower costs.

Mexico is also home to the top-selling beer in the U.S. In 2023, Constellation Brands’ Modelo overtook the crown from Bud Light. Constellation also owns Corona, which ranks in the top 10 U.S. beer brands, and fast-growing Pacifico.

All of the company’s beer brands are imported from Mexico, and beer accounted for 85% of the company’s sales in the first three quarters of its fiscal year.

If Trump implements the tariffs, Constellation’s cost of goods sold would rise by roughly 16%, according to estimates from Wells Fargo Securities.

The company would likely choose to offset the levies by raising prices, because moving production doesn’t seem like an option due to a 2013 antitrust settlement. Constellation has spent billions of dollars in recent years to expand its Mexican production capacity.

On the company’s latest earnings conference call, Constellation CEO Bill Newlands said “it’s really too early to hypothesize” about how the tariffs will play out.

“As you would expect, we have a lot of permutations that we have considered and certainly we’ll adjust our approach depending on what plays out as we go forward,” he told analysts on Jan. 10.

Uncertainty about tariffs has led a number of Wall Street analysts to downgrade Constellation’s stock since Trump announced his intention to reignite a trade war with Mexico.

Avocados have proven less easy to substitute than beers.

The fruit, once a rare sight in U.S. grocery stores, has become a staple of produce displays, thanks to the growing popularity of Mexican food and diets that call for “healthy fats.”

From June 2023 to June 2024, the U.S. imported more than 2.4 billion pounds of Mexican Hass avocados.

In the U.S., avocados are grown in California, Florida and Hawaii. But roughly 90% of the avocados eaten in the U.S. are grown in Mexico, according to U.S. Department of Agriculture data.

The country is one of the few places that can produce the fruit year round, ensuring that consumers can eat avocado toast in the summer and guacamole on Super Bowl Sunday.

Over the years, avocado consumers have proven that they are willing to pay more for the fruit. While avocado demand has roughly doubled over the last decade, prices have also climbed.

“There’s nothing like an avocado … There are times of the year that yes, our prices go a little bit higher, but I feel like that is also part of the norm with our consumers. We don’t see a great dip in our consumption when those prices are a little bit higher,” Alvaro Luque, CEO of the nonprofit Avocados from Mexico, told CNBC.

Chipotle Mexican Grill famously charges a premium for adding guacamole, but the chain’s customers have largely shrugged off price increases across its menu over the last few years. The burrito chain is one of the few restaurant companies that reported traffic growth quarter after quarter last year.

Outside of avocados and cars, some companies make clothing in Mexico, too. Kontoor Brands, for example, has turned to the region to make some of its Wrangler jeans. While some of its denim currently retails for about $60 at Macy’s, that could rise to as much as $75 with tariffs factored in.

If Trump does implement steeper tariffs on Canadian goods, McCain could shift even more of its production to the U.S. Suppliers could jump ship to a U.S. rival like Lamb Weston. Luckily, many French fry suppliers, including the Idaho-based Lamb Weston, have expanded their capacity since the Covid pandemic.

Tariffs on Canadian goods could also affect apparel.

Canada Goose has built its reputation on high-end outerwear for chilly temperatures, made in Canada. About 70% of the retailer’s merchandise is made in the country, and 30% is made in Europe at a factory that the company owns in Romania and at contractors in other parts of the continent.

A company spokesperson declined to comment on how Canada Goose is preparing for tariffs and whether it will increase prices.