Get ready to dig a little deeper for a Coke or Chevy Silverado.
Both Coca-Cola and GM said Wednesday they will have to raise prices on their iconic products in large part because of President Trump’s trade war.
The rising price of European aluminum and steel is expected to pinch their bottom lines — and the unexpected increases will be passed on to the consumer, the companies said.
“Clearly it’s disruptive for us,” Coca-Cola Chief Executive James Quincey told analysts while reporting the company’s second-quarter results, speaking about the cost increases. “It’s disruptive for our customers.”
Later, in an interview with CNBC, Quincey noted that the off-cycle price hike was “pretty unusual” for the brand.
“The tariffs on the metals, it’s one of many factors [that] cost us to go out in the middle of the year and announce price increase,” he said.
Trump, claiming US products were treated unfairly by the European Commission, earlier this year, slapped a 25 percent tariff on European steel and a 10 percent tariff on aluminum.
The move in recent weeks has sparked howls of protest from US businesses.
Then, on Wednesday, Trump, in a Rose Garden appearance with EC President Jean-Claude Juncker, vowed to resolve the steel and aluminum tariffs.
“We agreed today first of all to work together towards zero tariffs, zero non-tariff barriers and zero subsidies for the non-auto industrial goods,” Trump said.
The agreement to work toward a solution may come too late for consumers.
GM, while reporting higher second quarter profits, lowered its profit forecast for the year because the price of steel, aluminum and other commodities are rising faster than expected.
That, in turn, was crushing its bottom line.
In all, commodity- and currency-related headwinds total $1 billion, GM said, forcing it to cut its profits forecast to $6 a share for the year, from earlier forecasts of $6.50.
“The market in the United States is challenging,” GM Chief Financial Officer Chuck Stevens told analysts.
“We’re going to be competitive in the market, again to the extent that we have opportunistic ability to pass along some [cost increases], we will,” he added, noting that some actions had already been taken.
The slashed guidance and price increases are something of a double whammy for US consumers.
GM stock — held in many pensions — fell 4.6 percent, to $37.66.
Meanwhile, shoppers in the market for the Chevrolet Silverado and GMC Sierra — coming online in August — may see higher prices, the company said.
Ford and Fiat Chrysler Automobiles also joined GM Wednesday in slashing profit forecasts for the year.
Trade war fears have reverberated throughout US industries.
US farmers — hurt by trade tensions with China — got a bailout Tuesday, with Trump promising $12 billion in aid.
In Wednesday’s Rose Garden remarks, Trump said that the EU promised “almost immediately” to buy more US soybeans.
Source: Read Full Article