Now that the formal process has begun for the Trump Administration to place a 25 percent tariff on currently untaxed goods coming in from China–about $300 billion in merchandise value–Wall Street is starting to take a closer look on what the impact may mean for global economies.
In the U.S., one impact would likely be an increase in prices. But if consumers then choose to tighten up their purse strings, particularly on discretionary items like apparel and footwear, that could also result in more store closures, as one analyst noted.
The Office of the U.S. Trade Representative is holding a comment period next month, with a public hearing set for June 17.
Trade Wars: Some brands and retailers have addressed the impact of raised tariffs levied on goods coming in from China in recently reported earnings. While many companies have moved production outside of China for apparel goods, that’s not the necessarily the case for footwear manufacturers. And even for those who still import a percentage of finished goods from China, the 25 percent tax is still a “substantial” one.
Many companies have tried to mitigate the impact of previous increases by absorbing some of the costs even it it meant lower profits. But even Walmart is noting that there’s a limit to how much a company can absorb and that it too may need to increase some prices.
Most retail and apparel analysts expect to see possible price increases for non-apparel goods as early as over the summer, and for apparel and footwear merchandise, around Labor Day. That’s just in time for the back-to-school and holiday selling seasons.
Brexit: One more try for British Prime Minister Theresa May as she sets the week of June 3 for a final attempt to get her Withdrawal Agreement passed in Parliament. Regardless of which way the voting turns out, she’s also setting the stage for her departure as Prime Minister.
Earnings: Companies scheduled to report earnings next week include J.C. Penney Co. Inc., Nordstrom Inc., TJX Cos. Inc., and Urban Outfitters Inc. on Tuesday; Target Corp., VF Corp. and L Brands Inc. on Wednesday, and Ross Stores Inc. on Thursday.