After President Trump began openly talking about trade imbalances with China, many American business owners began to get nervous. Any in crease in the cost of imports will, eventually, filter down to the consumer. Commerce Secretary Wilbur Ross, though, doesn’t think these cost increases will amount to much, and he held up a can of Campbell’s Soup to prove his point.
Ross, appearing on CNBC, was defending the Trump administration’s 25 percent levy on steel imports and 10 percent tariff on aluminum.
“What I’d like to do, though, is to emphasize again the limited impact,” he began. “This is a can of Campbell’s Soup. In the can of Campbell’s Soup, there’s about 2.6 cents, 2.6 pennies, worth of steel. So if that goes up by 25 percent, that’s about six-tenths of 1 cent on the price of a can of Campbell’s Soup.
“Well, I just bought this can today at a 7-Eleven down here, and the price was $1.99. So who in the world is going be bothered by six-tenths of a cent?”
The illustration is frustrating to many. While one can of soup won’t make or break any American consumer, many Americans will feel the cumulative impact. Automobiles and appliances will show a marked increase in price.
Campbell’s wasn’t pleased by Ross’s explanation, either.
“Campbell said it now expects profits to decline by 5 percent to 6 percent this year, worse than earlier projections of between 1 percent and 3 percent,” CNBC writes.
CEO Denise Morrison has even stepped down. The company is now conducting a strategic review of sales.
Chief Financial Officer Anthony DiSilvestro, when pressed for an answer for their poor projections, pointed to tariffs.
“At this stage, given what we know about accelerating cost inflation in part due to the anticipated impact of import tariffs and the continuing headwind on transportation and logistics cost, we expect our margins will be down in fiscal 2019,” he said.
“The issue is primarily one of cost inflation and we’re seeing and expecting an acceleration on the rate of inflation across a number of ingredient and packaging items,” DiSilvestro added. “For example, we expect double-digit increases on steel and aluminum. A lot of that [is] driven or all of it’s driven by the impact of anticipated tariffs.”
Campbell’s stock took a nose-dive, and they posted a $393 million loss for this quarter.
Commerce Secretary Wilbur Ross isn’t buying their explanation. “It is physically impossible that a few days of a tariff resulted in a $393 million loss. They are using [the tariffs] as a cover-up for other problems,” he told CNBC.
Campbell’s wants to be clear. Their $393 million loss is their problem. The tariffs, though, are going to make that problem much worse.