FRANKFURT/SHANGHAI/NEW YORK (April 3): Businesses around the globe on Thursday faced up to a future of higher prices and reduced access to the world's largest market after US President Donald Trump confirmed their worst fears by instituting broad tariffs worldwide.

Trump ramped up his trade war with tariff rates from 10% to nearly 50%. He says the levies will bring jobs back to the US — but company executives were focused on possibly raising prices, reducing shipments or cutting back investment activity outright.

"This is how you sabotage the world's economic engine while claiming to supercharge it," said Nigel Green, CEO of global financial advisory deVere Group. "The reality is stark: these tariffs will push prices higher on thousands of everyday goods — from phones to food — and that will fuel inflation at a time when it is already uncomfortably persistent."

The effects on business are likely to be felt almost immediately, as long-established trading routes are disrupted.

German container shipping firm Hapag-Lloyd said on Thursday that tariffs could affect demand, cargo flows and costs. The world's fifth biggest container liner said it could be forced to adjust its service network in response.

Those fears were echoed by Dirk Jandura, president of Germany's BGA association, representing importers and exporters.

"We will have to translate the tariffs into price increases, and in many cases that means a drop in sales," he said

Trump sees tariffs as a way of protecting the domestic economy from unfair global competition and a bargaining chip for better terms for the US.

The most common method of dealing with tariffs is to raise prices, passing along the cost to customers as far as possible. Other companies may try to diversify supply chains, but Trump's reciprocal 34% tariff on China was accompanied by 46% and 49% tariffs on Vietnam and Cambodia, respectively — all Asian countries where companies had been shifting output.

Shares in Western sportswear brands Nike Adidas and Puma all dropped sharply on Thursday as Vietnam, Indonesia, and China are leading markets for them to source products.

In the US, retailers Target and Best Buy have said they will have to raise prices, but their margins are more likely to be squeezed, and Target and Walmart have been trying to negotiate with Chinese suppliers already dealing with a slowed economy.

Some European companies that primarily serve higher-income consumers were planning to raise prices even before confirmation of the 20% tariffs on European Union imports.

Italy's Illy Caffe and Ferrari have both said they will lift prices, calculating premium coffee drinkers and sports car buyers will be able to absorb the extra cost.

Giovanna Ceolini, head of Confindustria Accessori Moda, which represents Italian companies in the footwear, leather, fur and tannery industry, said that US tariffs come when companies are already struggling with increased costs.

"We are afraid that for our companies there will be a slowdown (in demand). It will depend on whether Americans are willing to pay a little more (for our goods)," she said.

"Made in Italy goods ... are appreciated in the world but cannot exceed a price threshold because they become unsellable."

Analysts at Jefferies anticipated a 6% increase in US luxury prices as companies seek to protect margins.

The White House says tariffs will encourage more onshoring, similar to the revamped USMCA trade deal Trump signed during his first term that encouraged manufacturing activity to shift from China to Mexico or Canada.

German fan and motor maker ebm-papst, for example, is deliberating over whether to build a third production plant or expand its existing site in Tennessee.

The group's CEO, Klaus Geissdoerfer, said he had initially thought of a new plant in Mexico, but "some are saying, 'maybe it's better to go to the USA after all because we'll have to pay customs duty in Mexico'."

The most severe risk, according to executives interviewed by Reuters, is that businesses will stop investing.

Several executives said they had spent the last few months accelerating purchases to bring inventories into the United States.

Automakers, aerospace companies, retailers and industrial names all increased imports — which ballooned the US goods trade deficit to a record US$157 billion (RM697.45 billion) in January — in advance of the tariffs. Now, they are more likely to hold off on spending plans.

"They're going to batten down the hatches, not invest, don't do any deals, and take out costs to try to get ahead of the coming economic whatever-it-is-going-to-be — malaise, or it could be a recession," said Bill George, former CEO of Medtronic and executive fellow at Harvard Business School.

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