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US Consumers Are Starting to Worry About Tariff Impact on Retail Pricing

Along with the spate of tariffs being bandied about between the United States and China, promises of price spikes at retail haven’t been far behind. And whether retailers have already passed tariff increases along to consumers, or they’ll be prepared to do so after Sunday when new tariffs on apparel and footwear take effect—consumers are already on high alert.

A study released Wednesday by global retail analytics and price optimization leader Intelligence Node, found that 54 percent of shoppers are concerned about the impact new tariffs will have on their wallets.

As many as 61 percent of surveyed consumers said they’ve been deterred from making a purchase online because of price, and 58 percent ranked clothing, footwear and accessories as the items they generally wait to see go on sale before making a purchase, tied with phones, laptops and tablets for the top spot.

“Our survey findings clearly indicate that consumers are more sensitive to price tags on consumer electronics and apparel products than others—categories that are at the center of the impact zone in the Chinese trade war,” Intelligence Node said. “Retailers will undoubtedly try to absorb these tariffs with price hikes.”

Already, Macy’s tested price increases in its furniture and housewares categories impacted by recent Trump tariffs, and found that consumers largely didn’t “have much appetite” for it. As such, the retailer said it’s looking at no price increases for products impacted by the Tranche 4 tariffs just days away.

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The problem, in particular, is that price hikes ahead of the critical holiday shopping season, could make promotional pricing even more vital to getting consumers’ attention.

“The impending tariffs will bite into everyone’s margins,” Intelligence Note co-founder and CEO Sanjeev Sularia, said. “Being able to optimize prices to maximize your margins, while putting great products into the hands of consumers at a price they feel is fair is key right now. This critical capability also allows brands and retailers to move inventory and reinvest profits into new goods they know consumers want.”

In just four days, on Sept. 1, 77 percent of all apparel, footwear and home textile products the U.S. imports from China will face an additional 15 percent tariff, escalated from 10 percent last week when President Donald Trump reacted to China’s own tariff retaliation. And on Dec. 15, the other 23 percent of Chinese apparel, footwear and home textile products will face the 15 percent tariff, according to data from the American Apparel & Footwear Association (AAFA). In just more than one month’s time, on Oct. 1, $250 billion worth of Chinese goods already being taxed an additional 25 percent, will instead face a 30 percent tariff.

“This is a tax that will hurt every American,” Rick Helfenbein, AAFA president and CEO, said even before Trump announced the latest tariff increases. “Contrary to the headlines, the Grinch has stolen the Christmas selling season for our industry.”

Apparel and footwear items, according to Intelligence Node, are caught in the crosshairs of the escalating global tariff conflict, whereby prices at brick and mortar and online are expected to rise. “Any slowed growth in sales could negatively impact retailers’ supply chains and their ability to procure new merchandise for 2020 and beyond,” the company noted.

From Trump’s perspective, however, it seems things are going according to plan.

“…We are doing very with China…” the president mentioned in a tweet Wednesday.

From China’s perspective, it’s leveraging all of the tools it has to fight the drag out battle that is this trade war. The country announced Friday new tariffs between 5 percent to 10 percent on $75 million worth of U.S. goods, prompting Trump to push both already in place, and proposed tariff rates up by 5 percent.

“The US Administration’s blunt force tool to bring about a trade deal has been tariffs. China has to date been judicious and has limited use of tariffs but as the conflict drags on they see it as a necessary measure,” said Michael Zakkour, Tompkins International vice president and China/Asia Pacific practice leader, who will also be speaking at Sourcing Summit New York on Oct. 17. “Ultimately the goal is to make it as difficult for U.S. companies to sell their products in China as has been made for Chinese companies exporting to America. As I have maintained for the last 17 months, tariffs are not effective trade dispute tools and the real pain is only being felt by average workers and consumers on both sides.

With just days left before the proposed new tariffs roll out, there’s been little to indicate Trump will be dialing the action back—though Zakkour is holding out hope the holiday season can still be saved.

“I believe [the tariff implementation] will hold through the holidays so as not to cause a major disruption or hinder holiday sales,” he said. “The bigger issue is will there be a trade deal before end of the year and, if not, what effect it will have on the first two quarters, and if what this is all leading to is a major decoupling of China and the U.S. and a new world trade order.”