Sonoco Hikes Some Prices By 4% In Response To Tariffs

Yesterday we showed that Friday's trade war is already starting to impact prices of US goods sold in China, with Tesla announcing prices hikes on its Model S and X of roughly 20% across the board as a result of new tariffs imposed on imported cars by Beijing.

Today, in a similar move but in the opposite direction, US petrochemical company  Sonoco announced that will raise prices on all composite cans and metal ends in the U.S. and Canada by 4%, in response to recent tariff announcements, with the price increases effective Aug. 1.

“Sonoco’s global sourcing power and commitment to supply security have allowed us to effectively mitigate historic inflationary pressures,” said Robin Gordon, division vice president of sales for Sonoco’s U.S. and Canada composite cans and metal ends.

“However, the recent trade announcements assigning tariffs on the steel and aluminum supply, along with strong regional demand, have placed unprecedented stress on our suppliers’ feedstocks and corresponding input costs. While we will continue to monitor the domestic and global sourcing landscape to find ways to mitigate inflation, we do need to recover our current cost exposure. We will continue to work with our suppliers to ensure supply security and find ways to bring input costs down over the coming months.”

The action is in response to Trump's 25% tariff on steel imports and 10% tariff on aluminum imports from Canada, Mexico and the European Union.

And since downstream customers will pass on these higher costs to end consumers, it is only a matter of time before these higher costs, not just from Sonoco but all its peers, show up in inflation. Yet what is odd, is that in a note released today, Goldman continues to press the case that trade war will have a negligible effect on economic growth and inflation:

We continue to believe the effects of the tariffs imposed to date should be small. We expect that these should lower the level of GDP by only 1-2bps, and increase core PCE inflation by about 4bps (yoy) once they are phased in.

For those asking, 4bps is 0.04%, or basically noise, and yet judging by Sonoco's price increase which is 100x higher, if on a limited set of products, this may be yet another forecast where Goldman is wrong.