Retailers, From Walmart to Macy’s, Join Other Industries to Deliver This Message To Trump

Food & Drink

As the uncertainty and potential impact over U.S.-China tariffs war still looms large, 661 companies and associations from different industries, including retailers Walmart, Target, Costco, Macy’s and Gap, just sent a letter to the White House urging the Trump administration to do this: Get back to the negotiating table and resolve trade tariffs spat with China. 

“We remain concerned about the escalation of tit-for-tat tariffs,” according to the letter sent Thursday by Tariffs Hurt The Heartland, the largest nationwide business community effort against tariffs and backed by more than 150 trade groups across retail, tech, manufacturing and agriculture sectors. “Additional tariffs will have a significant, negative and long-term impact on American businesses, farmers, families and the U.S. economy. Broadly applied tariffs are not an effective tool to change China’s unfair trade practices. Tariffs are taxes paid directly by U.S. companies….not China.”

Trump administration has already raised tariffs to 25% from 10% on about $200 billion of furniture and other imports from China and threatens to impose 25% of additional tariffs on another $300 billion of Chinese imports that will affect categories including apparel, shoe and toys.  The letter was delivered as the Office of the United States Trade Representative is set to begin hearings considering the 25% tariffs on the remaining $300 billion in Chinese imports. 

Imposing new tariffs on an additional $300 billion in goods, combined with the fallout of previously implemented tariffs and retaliation, would lead to the loss of more than 2 million U.S. jobs, add more than $2,000 in costs for the average American family of four and cut the value of U.S. GDP by 1%, according to the letter, citing research by consulting firm Trade Partnership Worldwide. 

Fashion labels Alexander Wang and Ralph Lauren; North Face and Timberland parent VF Corp.; teen retailer American Eagle; shoe retailer Foot Locker; pet-gear chain PetSmart; discounter Five Below; greeting card company Hallmark Cards; crafts retailer Michaels; and home-furnishings retailer Pier 1 are among other retailers that have also signed the letter. Foreign brands including IKEA North America Services and Puma North America also put their signatures in. 

Specific Retail Impact

For retailers specifically, U.S. consumers would pay $4.4 billion more each year for apparel, $2.5 billion more for footwear, $3.7 billion more for toys, and $1.6 billion more for household appliances in the event additional 25% tariffs on $300 billion in Chinese goods are imposed, a study prepared by Trade Partnership for industry trade group National Retail Federation said this week.

“The proposed tariffs, especially at 25% would be too large for U.S. retailers to absorb and, once passed on, would result in prices higher than many consumers would be willing to pay,” the study for NRF said. “The ability of U.S. retailers to shift sourcing from China to other suppliers is limited and could take years to complete.” 

The tariffs war has become a key watchpoint for the retail industry and a key discussion point on many retailers’ recent quarterly earnings calls. Many retailers have warned of price increases for consumers and said they are trying to mitigate any potential impact by renegotiating with vendors, shifting production out of China, or redesigning products. 

High-end furniture and home-furnishings retailer RH, formerly known as Restoration Hardware, said this week that it’s renegotiated product costs and “selectively raised prices” to mitigate the impact of the tariffs increase. RH said it’s moving certain production and new product development out of China as well as expanding its own manufacturing facilities in the U.S. 

Plastic clog maker Crocs said this week that it expects to slash the amount of U.S. products sourced from China to below 10% for 2020 from about 30% currently as it continues its “multi-year effort to reduce” sourcing from China.

While its direct tariffs-related exposure is small, Lululemon, meanwhile, said this week that its financial outlook includes higher airfreight costs to ship goods as it’s trying to “avoid anticipated port congestion in the Asia region due to the pending tariff increases.”

In other examples, both Dollar General and rival Dollar Tree have cited the tariff war as a risk factor in their annual reports as China represents a “substantial” amount of imported merchandise. Walmart CFO Brett Biggs said in May increased tariffs will lead to increased prices for customers. Walmart has been watching the situation for months to come up with “appropriate mitigation strategies,” he said.

All the noise may be starting to have a ripple impact on consumers.  While general consumer sentiment about jobs and business conditions remains strong, concerns about increased consumer prices due to heightened tensions surrounding the U.S.-China trade talks are negatively impacting about half of the respondents, according to a monthly survey of U.S. households released this week by Gordon Haskett analyst Chuck Grom. 

“Concerns around geopolitical tensions appear to be weighing on the consumers’ psyche and in turn overall spending,” Grom said in the study. 

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