US President Donald Trump's decision to introduce 10% tariffs on a further $200 billion worth of imports from China is likely to impact retailers, and ultimately the consumer, according to a retail analyst.
Commenting on the new tariffs, Neil Saunders, managing director of GlobalData Retail, said that the new legislation is "bad news" for the retail sector, "especially as the latest round seems to extend the tax to a vast array of consumer goods.
"Many retailers will now be faced with a difficult choice of whether to pass the cost increases across to consumers or to take a hit on their margins. The exact response will vary from retailer to retailer but, in our view, both strategies are likely to be used."
China has vowed to retaliate against Trump's actions, however the US President has threatened duties on a further $267 billion of imports, in what has been dubbed a 'phase three' of actions against the Asian country.
Tariffs have put the U.S. in a very strong bargaining position, with Billions of Dollars, and Jobs, flowing into our Country - and yet cost increases have thus far been almost unnoticeable. If countries will not make fair deals with us, they will be “Tariffed!”
— Donald J. Trump (@realDonaldTrump) September 17, 2018
Cost Increases
"The pain for retailers is real, not least because it comes amid a raft of other cost increases including more spending on technology, elevated logistics costs, higher gas prices, and rising labor expenses," commented Saunders.
"In short, additional tariffs are the last thing the retail sector wants."
While Saunders believes that the US consumer is currently in a position to deal with some mild price rises in certain categories, an increase in prices across the board "will likely result in a decline in retail volumes over the longer term, which will be unhelpful to the sector."
Shifting production to other markets could be an option for some retailers, but few countries boast the manufacturing capacity of China, and "the difficulty associated with quickly shifting supply chains, this can only be achieved over a period of time and will, in itself, result in some additional expense", he said.
Gloomy Start
Should the bar be raised yet further – President Trump is considering raising the tariff rate from 10% to 25%, according to reports – 2019 could well start off for retailers on a "gloomy note"," Saunders added.
"Ultimately, while the President may have a sound political motivation for trying to level the playing field in world trade, these policies will bring at least short-term pain to retail and to the consumer."
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
