Axios Markets by Emily Peck

One reason CEOs are so keen on becoming Donald Trump’s new besties: The incoming president could make their profits go poof.

Why it matters: The president-elect’s proposed tariffs are so high they could entirely wipe out the annual profits of some large companies, per an analysis from consulting firm PWC.

Of course, companies won’t sit idly by and let that happen — those costs will likely be passed along to American consumers.

Catch up fast: Trump said last month on Truth Social he’d put 25% tariffs on all goods coming from Canada and Mexico — the two largest U.S. trading partners — as soon as he takes office.

That’s on top of tariffs of 60% or more on goods from China, and 10% to 20% tariffs on imports from the rest of the world.

Zoom out: These measures could increase the amount of money businesses pay in tariffs by more than 400%, per a data analysis that PWC conducts for clients using company-specific data from U.S. Customs.

Zoom in: The modeling looks at worst-case scenarios. When Trump says all goods will be tariffed, companies take that seriously, says Chris Desmond, a PWC principal for customs and international trade.

Behind the scenes, the Trump team is telling corporate consultants that there’s no budging the president-elect on his tariff stance, the Wall Street Journal reported.

PWC’s model finds tariff increases are often larger than an importer’s annual profits across a range of industries including autos, retailers, communications equipment-makers, and companies that import fruits and vegetables.

That’s leading companies to question if they can change their supply chain strategies to adjust or pass costs to consumers, Desmond says.

Reality check: It’s certainly possible some firms that import goods may absorb these costs and accept lower profit margins, but many have already said they will pass the increased costs through.

Flashback: Not only do companies pass through tariff costs to consumers, sometimes they take the opportunity to raise prices on other goods, too.

After the 2018 tariffs on washing machines hit, the price of dryers — which weren’t tariffed — went up too, per research published in the American Economic Review in 2020.

The bottom line: Lots of uncertainty out there, but it’s a safe bet that companies won’t just sit by and let their profits disappear.