President Trump is moving to address the urgency needed to combat a fast-moving coronavirus pandemic that is threatening to derail the American economy and decimate the apparel sector.
On Tuesday, the president called for lawmakers and his administration to join hands in passing new legislation that would push through a “big, bold” stimulus plan designed to quickly pump at least $850 billion–but could reach $1 trillion–into the economy and stave off financial disaster.
“We’re looking at sending checks to Americans immediately,” Treasury Secretary Steve Mnuchin said at Tuesday’s press briefing, with the payments mailing out as soon as “in the next two weeks.” While Mnuchin declined to state the amount of the checks, speculation says it could be $1,000 per person exclusive to those earnings less than $1 million annually.
Small business owners are set to receive the checks as well, in addition to gaining access to business-critical loans. The administration is considering allowing 90-day deferments of income-tax payments that are expected on April 15 each year, Mnuchin added.
“We have to get this done now,” Mnuchin said of the timeline for when Trump wants the plan approved, adding, “we’re going big.”
Businesses are already feeling the effects of shutdowns and consumer demand that has seemingly evaporated overnight. Noting that airlines are facing a crisis worse than the post-9/11 fallout, Mnuchin said, “We don’t want the airline industry to go out of business.”
“We don’t want anyone to lose their jobs,” he continued, adding, “The president understands this.”
Financial markets will remain open, Mnuchin said, noting that the government “wants people to have access to their money.” Markets might have to scale back their hours of operations at some point, he added.
Earlier in the day, Mnuchin said he gave the greenlight to Federal Reserve chairman Jerome Powell’s request to set up a special purpose vehicle, a commercial paper fund worth $1 trillion, to help keep credit flowing to households and businesses—another bid to prop up spending.
The Federal Reserve said the Treasury will provide $10 billion of credit protection, while Mnuchin said he gave the okay because of “liquidity issues in money market funds.” Money market funds are short-term debt instruments usually less than 13 months that pay out earnings in the form of dividends. The federal government similarly provided a liquidity injection during 2008’s Great Recession.
The latest talk about infusing liquidity into the markets offered a modicum of relief to a volatile and struggling stock market that’s still trying to find its bottom. The Dow Jones Industrial Average rose 1,000 points in intraday trading Tuesday following the Federal Reserve announcement.
And despite the current turmoil, Trump believes there’s a light at the end of the tunnel.
“I think our economy will come back very rapidly” once this is over, Trump said.
“We have to fight that invisible enemy,” he stressed, adding, “We are committed to get small business the support they need.”
The president praised the spirit of bipartisanship spurring both Republicans and Democrats to forge additional stimulus packages. Trump recounted a “good conversation” Tuesday morning with New York governor Andrew Cuomo, adding that the state appears to the “number one hotspot” at the moment. The U.S. needs to take “aggressive action right now as one nation, one family, so we can rebound strongly” when the health crisis is over, he said.
Trump emphasized that he’s “always known this was a pandemic,” and is open to instituting a “national lockdown” if necessary remains hopeful that scenario can be avoided.
Vice President Mike Pence said the Department of Defense is exploring the option of setting up either military field hospitals or M.A.S.H.–mobile army surgical hospital–units in case they are needed.
On Tuesday, credit ratings firm Moody’s Investors Service’s coronavirus heatmap identified at-risk sectors most vulnerable to the effects of the pandemic.
In addition to airlines and auto suppliers, apparel is among the industries considered to have high exposure as most impacted in the near term, according to the report. Moody’s baseline scenario calls for a negative impact on 16 percent of business sectors, including apparel, but could jump as high as 45 percent of industries if the number of infections surges and the virus can’t bequickly contained.
That scenario would lead to extensive travel restrictions and quarantines, Moody’s said.
“Liquidity is a more-significant concern for aerospace, apparel, consumer nondurables, and mining,” the credit ratings firm added.
And non-food retailers, including department stores, are at risk given a product mix that’s not focused on quarantine necessities. They’re more likely to be subject to government-mandated shutdowns, too, Moody’s noted, adding that temporary store closures will also have a negative impact on apparel sales and profitability over the near term.
Though apparel firms such as G-III Apparel Group, J. Crew and Caleres have been diversifying their sourcing away from China, “the country remains an important source for inputs used for manufacturing in other countries.”