By Natasha Khan and Ruth Simon

The business world's tariff problem is turning into a real world price problem.

From industrial giants like GE Aerospace to luxury brands like LVMH and Hermès to the telecom outfit Verizon, companies say they are making plans to pass along at least some of the cost of tariffs to consumers.

Birkin handbag maker Hermès last week said it would raise its prices in the U.S., making American buyers swallow the entire cost of tariffs on European goods. Five Below, which sells a range of goods from clothes to toys -- many of which cost $5 or less -- plans to round up or down to whole numbers. For instance, a $1.75 bottle of Sally Hansen long-wear nail color could cost $2.

"It will not be one-size-fits-all," LVMH finance chief Cécile Cabanis said. "It can be very different depending on the brand, depending on the categories within the brand."

The decision of how much to jack up the price is as much of an art as it is a science: Pass along the tariff cost entirely to the consumer and risk turning off customers for periods that could last far beyond this moment. But if companies decide to swallow the tariffs themselves, they could destroy profits.

Some companies are holding steady for now. Hyundai Motor -- which is facing a 25% tariff on imported vehicles -- has pledged to keep prices steady until June lest rising sticker prices for Sonata sedans and Tucson SUVs scare buyers off.

"You may not know the price of a bag, you may not know the price of a jacket, you might not know the prices of shoes, but everybody knows the price of cars," said Hyundai CEO José Muñoz. "If I simply pass on the incremental cost to the consumer and I don't sell cars, I'm out of business."

Currently, the South Korean automaker imports about 60% of the vehicles it sells in the U.S. mainly from Korea. Muñoz wants to lower that to 30% in the coming years. He said he would re-evaluate prices in June.

Kimberly-Clark cut its profit forecast for the year in anticipation of $300 million in new costs from the global trade war. But the maker of Kleenex tissues and Huggies diapers doesn't plan to raise prices.

"It's not as simple as, well, tariffs are in, so you price it all away, right?" Kimberly-Clark Chief Executive Michael Hsu said. Hsu said the company is looking to change where it sources some of its products. "The problem with the sourcing is it takes longer."

But many companies, especially small ones, can't hold prices steady amid massive tariffs.

Some 47% of small businesses say they have increased prices since the beginning of the year, and 60% plan to raise prices in the next three months, according to a survey of more than 500 small businesses conducted in April for The Wall Street Journal by Vistage Worldwide, a business-coaching and peer-advisory firm.

Executives at toy maker Zuru, which manufactures in China, are examining every item to find a new price point. But there is consumer psychology to consider, said Nick Mowbray, who leads the company with his brother. He says numbers such as $9.99, $19.99 or $49.99 are strategic price barriers -- thresholds to which consumers are sensitive.

"Once you cross one of those, the perceived value changes dramatically," said Mowbray.

This is especially true for impulse purchases such as Zuru's self-sealing water balloon brand, Bunch O Balloons, he said. Instead of raising prices on those products, the company is considering reducing the number of items per pack -- for example, 13 balloons rather than 15. In recent days, Zuru decided to raise the suggested price of its collectible ugly monster line, Fugglers, by more than 60% to $12.99 from $7.99.

"Everyone is trying to build the airplane as it flies," said Mowbray.

Over at Action Holdings, a Tampa-based e-commerce company that sells grilling tools, dog harnesses and spy gear, Andrew Gilliland says he is running more pricing tests each week to determine just how much he can raise prices. Right now, he has settled on an average price hike of about 10%.

But each price decision is particular. Take the grill brush with an acacia handle and a replaceable head. It sold for $24.99 before the new tariffs.

The company tested incremental price increases up to a threshold of $29.99 and found that people were willing to pay the highest price. Smaller increases proved less successful. "Consumer psychology is weirder at $26.99 or $27.99," Gilliland said. "The in-betweens don't go as well with consumers."

Hardware distributor Fastenal said it raised prices in April.

In a call with analysts earlier this month, Fastenal's then-finance chief, Holden Lewis, said it developed a pricing-review tool in response to earlier rounds of tariffs in 2018. This allows the company to provide granular information to its customers about "the whys and the whats and the wheres" of the price increases, he said. (Lewis's planned resignation was effective last week.)

"You never say this is an easy conversation, and the order of magnitude is somewhat something we haven't navigated before," Lewis said.

Write to Natasha Khan at natasha.khan@wsj.com and Ruth Simon at Ruth.Simon@wsj.com

(END) Dow Jones Newswires

April 23, 2025 05:30 ET (09:30 GMT)

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