Trump Tariffs: Retail Giants React to Trade War Fears

Jakarta, CNBC Indonesia – The import tariff policy implemented by the President of the United States (US) Donald Trump is now starting to hit back at Uncle Sam’s retail giants. Large companies such as Estee Lauder to Ralph Lauren have been forced to take extreme steps, ranging from increasing selling prices to increasing advertising budgets to target the rich, in order to cover rising costs due to increasingly suffocating import duties.

The retail sector, which has direct contact with consumers, is the group that suffers most from Trump’s tariff policies, which trigger increases in input costs and suppress demand. To survive, these companies now have to dig deeper into their pockets to change business strategies in a market that is increasingly divided between the well-off and the lower middle class who are struggling due to high rent and food costs.

Tapestry, the parent company of luxury brand Coach, reported a rise in margins this quarter thanks to sales of Tabby handbags, even though it had to increase its marketing budget by 40%. On the other hand, the impact of tariffs is starting to undermine the performance of the Kate Spade brand, which is also under the auspices of the group.

“This investment helps strengthen our brand building efforts,” Tapestry CEO Joanne Crevoiserat told ReutersThursday (5/2/2026).

This massive investment step was taken precisely when stocks of goods subject to tariffs began to flood company inventories, with predictions that the peak impact of import duties would occur in the next few months. However, investors are starting to doubt the effectiveness of the surge in advertising spending by Estee Lauder, Ralph Lauren and Canada Goose amid economic uncertainty.

“For companies that are unstable, there is a higher chance of risky earnings reports,” said Illia Kyslytskyi, Portfolio Manager at Yaru Investments based in Singapore.

“In terms of marketing budgets, companies should be aware of a possible decline in demand in the affordable luxury segment,” added Illia Kyslytskyi.

Margins Eroded and Profit Projections Amble

Estee Lauder is now seeking to shift into the premium cosmetics and perfume category by raising price levels under the leadership of CEO Stephane de La Faverie to recover performance after being hit by weak demand. However, the burden of tariffs remains a real threat to corporate profits in the long term.

Estee Lauder estimates that this tariff policy will erode their annual profits by up to US$ 100 million (Rp. 1.68 trillion) in the second half of this year. The company also projected current quarter margins would shrink by 50 basis points, triggering a 20% plunge in its share price in Thursday trading.

New York-based Ralph Lauren experienced similar conditions, where quarterly operating costs jumped 12% on an annual basis due to heavy advertising spending on the Wimbledon and US Open tennis tournaments. The company expects margins to shrink between 80 and 120 basis points in the current quarter due to high spending and a difficult operating environment in North America.

Meanwhile, Canada Goose failed to achieve its quarterly profit target which resulted in its share price falling sharply, because the company did not dare to restore its financial projections which had been withdrawn due to tariff uncertainty. Companies continue to increase marketing investment even though their fundamental conditions continue to receive attention from capital market analysts.

“We think they also need to return to quarterly or at least annual projections to give confidence to the investment community that the continued increase in spending will normalize so that the decline in income stops,” said Laurent Vasilescu, Senior Analyst at BNP Paribas Equity Research.

(tps/luc)

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