Companies Rethink Price Hikes Amid Trade Deal Clarity and Consumer Caution

A notable shift has occurred in the corporate landscape, with fewer global companies signalling price increases during the third quarter compared to earlier in the year. This change in strategy is largely attributed to improved clarity in financial planning, facilitated by new US trade deals, and a concerted effort by firms to mitigate the risk of losing sales amidst consumer sensitivity. This trend emerges from a comprehensive review of company statements and earnings calls.

Quantitatively, the deceleration in price hike announcements is significant. Reuters, which has diligently tracked corporate comments on tariffs, identified approximately 28 companies explicitly stating price increases since October 16. This figure marks a considerable drop from about 51 companies disclosing such actions in the second quarter and nearly 90 in the first quarter. Data from market intelligence platform AlphaSense further corroborates this trend, showing a roughly 68% decrease in mentions of tariff-related price hikes by global companies between the first-quarter earnings period (April 15-July 15) and the third quarter (starting October 16). Consequently, initial forecasts of over $35 billion in tariff-related costs for the third quarter were largely lowered as the business environment began to clear.

The easing of the "fog" that had previously paralysed business planning is a key driver behind this change. With new trade deals reducing exposure to President Donald Trump's trade war—which had driven US import tariffs to their highest levels since the 1930s—companies are finding firmer ground. Walmart's incoming CEO, John Furner, noted on a recent earnings call that the company had "seen less (tariff) impact than what we thought we would have expected early in the year." This sentiment reflects a broader market shift, as Brian Jacobsen, chief economist at Annex Wealth Management, observed: "Earlier this year, investors wanted to know what each company’s tariff strategy was. Now we’re just looking at how they’re executing on that plan... Few companies wanted to stick their necks out with price hikes."

The latest quarterly earnings reports from major US retail names like Walmart, Target, Home Depot, and Lowe's highlighted diverse strategies for navigating a spending slowdown among cash-strapped consumers. These retailers, particularly Walmart, described a sharp divide in spending between affluent and lower-income consumers. As a result, many are strategically implementing discounts heading into the holiday season, a tactic partly in response to the longest-ever US government shutdown, which delayed federal benefits and impacted economic data releases.

Consumer price sensitivity and competitive pressures are also playing a crucial role in restraining price increases. Ken Mahoney, CEO of Mahoney Asset Management, pointed out that "companies have not been passing through the increases" to protect their market share. Target, for instance, plans to cut prices on 3,000 food, baby, and household essentials this holiday season, up from 2,000 items in 2023. This cautious approach is echoed by industry leaders, with Stefano Caroti, CEO of Deckers Brands, anticipating "a more cautious consumer as the full impact of tariffs and price increases will be felt here in the US." The risks of being uncompetitive are also evident; Mr. Coffee seller Newell Brands raised prices, only to find competitors did not follow, leaving them at a disadvantage.

Despite the concerns about tariffs and price hikes, September inflation data indicated that consumer inflation remained restrained. This was largely due to a slowdown in the pace of price increases for airfares, hotel rooms, and cheaper used cars and trucks, even as October inflation data was delayed. From a sectoral perspective, industrials led the frequency of pricing actions in the second and third quarters, closely followed by the consumer sector. This contrasts sharply with the first quarter, where consumer companies significantly outpaced all other sectors in price adjustments, often citing pressure from suppliers.

Companies are employing various mitigation strategies to navigate the tariff landscape, including early purchases of inventory, shifting sourcing locations, and maintaining competitive discipline. The trajectory for future pricing remains uneven, with some firms anticipating additional fourth-quarter pass-throughs, while others expect prices to steady. Guidance for future pricing often depends on tariffs not escalating further. For example, Rockwell Automation projects a couple of points of price increases for fiscal 2026, with 1% from underlying price and 1% from tariff adjustments, clarifying that they are "not using tariffs as an opportunity for us to grab some profit."

Ultimately, understanding the tariff "end game" is deemed essential for long-term planning. Dave Evans, CEO of Fictiv, a global contract manufacturer, highlighted this, stating, "We’re seeing some costs passed through to customers, but the majority of companies are either absorbing the impact themselves or sharing the burden with their suppliers. Many organisations are holding off on major price increases until there’s more clarity on long-term tariff strategy; they want to avoid multiple adjustments if policies shift again." This cautious approach underscores a desire for stability and predictability in a continually evolving global trade environment.