Can you imagine that just because of trade tariffs, corporate expenses have increased so much that they are bigger than the entire economy of a rich country like Switzerland? Yes, according to a recent report by S&P Global, Donald Trump’s tariff policies in America have put an additional burden of about $ 1.2 trillion on companies by 2025.
The big thing is that the entire GDP of Switzerland is currently around 1.1 trillion dollars. That is, the additional burden on American companies is equal to the economy of an entire country. This comparison makes it even more clear how deep and widespread the impact of tariffs can be.
Increasing expenses and decreasing earnings of companies
S&P Global analyzed nearly 9,000 large public companies and found that spending for companies this year is estimated to reach $53 trillion, which is much higher than earlier estimates. Apart from tariffs, increase in salaries, cost of energy and increasing investment in sectors like AI are also increasing this expenditure. Due to these reasons, there is a sharp decline in the profits of companies. The profit of big companies like Walmart, Amazon and Costco has decreased by about 907 billion dollars.
Who is bearing this burden?
It has been told in the report that about two-thirds of the losses incurred by these companies (about 592 billion dollars) are being recovered from the customers. In the form of increased prices, the general public is now compensating for the losses of the companies by purchasing expensive goods. The remaining one-third of the losses (about $315 billion) have been borne by companies internally, that is, by cutting their profits or by combining expenses.
Production decreased, but inflation increased
Due to the impact of these tariffs, the actual production of companies has decreased, that is, they are now producing less goods than before, but are increasing the prices. Due to this, consumers are having to buy less goods at higher prices and it is not just about public companies. The report shows that unregistered companies and private equity firms have also incurred additional expenditure of about $278 billion, taking the total loss to $1.2 trillion.
The poor and middle class are hit the hardest
The debate has now intensified as to who bears the burden of the tariff. Federal Governor Christopher Waller, appointed during Trump’s time, believes that this has mostly affected the rich class. But on the other hand, many economists, like Christopher Hodge, say that the lower and middle classes have been hit the most. This is because this group spends more of their income on goods whose prices have increased due to tariffs, such as furniture, electronics, clothing and household goods.