Chief Executive Research
While the Trump-China tariffs have been a boon to many U.S. manufacturers and a curse to many others, a new survey by Chief Executive Group, in partnership with AlixPartners, finds that those in both camps have something in common: They’re raising prices, and they’re raising them sharply.
Our most recent survey of CEOs finds 87 percent of U.S. manufacturers have raised their prices or are considering it in the months to come. While that’s on par with our January numbers, where 84 percent said they were increasing what they charged customers, the concentration of companies increasing prices at ever-shaper rates has soared.
In our January polling, only 12 percent of CEOs said they were looking to increase prices more than 5 percent in the coming year, with most simply trying to keep pace with inflation. Our May survey found 39 percent of CEOs hiking prices 5 percent or more. And while no CEOs we polled in January were considering increases above 7.5 percent, 16 percent of those we surveyed now say they are looking at or instituting hikes at that scale.
At least a proportion of the price increases are due to supplier price hikes, with 73 percent of manufacturing CEOs reporting supplier price increases in May, down slightly from 75 percent in March.
At this point, manufacturing CEOs are not surprised by disruption, having navigated through years of supply chain woes during Covid, and know that pricing isn’t the only tool at their disposal.
So, the majority of manufacturers who have global exposure are exploring alternative countries to work with to avoid high-tariff zones, at 55 percent. At this time, 36 percent are exploring domestic manufacturing options.
In some cases, however, there is no other option than to purchase specific materials from certain nations. “We are an ‘American’ manufacturer, but we still require components from elsewhere that are not made in the U.S.—in fact, they are ONLY made in SE Asia,” says the CEO of a lighting manufacturing firm.
For manufacturing companies with exposure specifically in countries that received a 90-day pause on tariffs, there is no consensus on strategy. One-third of CEOs in manufacturing say that they are shifting to counties with lower tariff rates, the most popular strategy. Other tactics being considered: negotiating cost reductions (29 percent), finding domestic manufacturers (27 percent) and advancing purchases (26 percent).
“React when possible and remain calm,” says Herb Beuter, owner of HBE Engineering as an especially important tactic to navigating this current environment.
Our survey also found manufacturing CEOs far more likely to take an active approach to the changing business environment than their non-manufacturing peers. Only one-third of CEOs in manufacturing told us they are playing it safe by staying cautious and observing market trends, compared to 42 percent of those in other industries. Instead, more manufacturing CEOs are electing an aggressive approach: go on the offensive and capture market share, at 42 percent, versus 36 percent of non-manufacturers.
“This is another one of those tumultuous times such as Covid,” said Daryl Funston, CEO of Wesmar Company. “I believe the businesses that survive are those that can react quickly and be flexible. They can change directions quickly, and they have not extended themselves too far financially with always worse case scenarios in mind.”
When it comes to strategy over the short term, there are four major actions the majority of manufacturing CEOs say they will enact in the 3-to-6-month period:
In the coming 6-to-12-months there is no majority consensus, signaling that medium term plans aren’t exactly ironed out yet. Still, a significant proportion of manufacturing CEOs will do financial reforecasts and scenario planning at 43 percent.
The bottom line: Any action is better than nothing, with only 5 percent electing a wait and see approach in the short term and 1 percent over the medium-term.
Since 2002, Chief Executive Group has been polling hundreds of U.S. CEOs at organizations of all types and sizes, to compile our CEO Confidence Index data. The Index tracks confidence in current and future business environments, based on CEOs’ observations of various economic and business components. For additional information about the Index and prior months data, visit ChiefExecutive.net/category/CEO-Confidence-Index/
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