Portuguese corporations prioritizing reduced financial gains
In the fierce global market, Portuguese businesses are facing the brunt of higher tariffs imposed by the US. With profit margins already low compared to the Eurozone average, they've got less wiggle room to absorb these additional costs. Yet, over eight out of ten national companies are in no rush to increase prices of their goods and services, preferring to take a hit on their short-term profitability[2].
A flash survey by the Portuguese Business Association (AEP) revealed this surprising trend. Only 18% of the nearly 300 companies indicated they'd be making price and cost adjustments to tackle tariff consequences[1]. Instead, more than a third (36%) of firms have either no strategy or immediate actions planned to tackle the trade war impacts[1].
Luis Miguel Ribeiro, the association's president, explains this passive response is due to the competitive nature of global markets and the need for companies to avoid passing increased costs straight to consumers, at least initially[1]. However, he warns that businesses will likely have to reflect these tariff impacts in their product prices at some point, or risk their financial viability[1].
On the flip side, some companies seem to be delaying strategic decisions because of the uncertainty brought about by the trade war climate[1]. Diversifying or redirecting sales markets is the preferred strategy among entrepreneurs[1]. But, Ribeiro points out that this is a long-term endeavor that can't be implemented overnight[1].
The survey involved 296 companies, with 71% being exporters and 50% from the industrial sector[1]. It's worth noting that 42% of these companies are micro and small entities, while 46% are medium-sized, and the remaining 12% are large[1].
In the broader European and global context, the European Commission is closely monitoring the US tariff impacts on EU member states like Portugal[3]. They are exploring countermeasures, such as reciprocal tariffs and other trade defense actions[4]. For Portuguese companies, aligning with EU-wide strategies and leveraging EU trade agreements could offer additional support in dealing with these challenges[3]. However, detailed data on the profitability of Portuguese companies in response to US tariffs remains elusive[3].
In essence, while the specific strategies and profitability impacts for Portuguese companies aren't detailed, the general approach is likely to involve diversification, supply chain adjustments, and leveraging EU trade policies to mitigate the harsh effects of US tariffs.
Enrichment Insights:
- Businesses might employ strategies like diversifying export markets, supply chain optimization, product re-classification, collaboration with US partners, and investing in technology to combat the impact of tariffs.
- Increased costs, uncertainty, market competition, and planning challenges could affect business profitability due to tariffs.
- The European Commission is monitoring the impact of US tariffs on EU member states, and EU responses might involve reciprocal tariffs and other trade defense actions. Aligning with EU-wide strategies and leveraging EU trade agreements can provide additional support for Portuguese companies.
Portuguese businesses are contemplating diversifying export markets and optimizing supply chains as strategies to combat the impact of tariffs, as reported by the Portuguese Business Association. During the current period of uncertainty brought about by the trade war climate, some companies might be delaying strategic decisions. In the broader European context, the European Commission is exploring countermeasures to US tariffs and offering support through EU-wide strategies and trade agreements, with detailed data on Portuguese company profitability remaining elusive.
