The retail industry, which weathered Donald Trump’s initial tariffs in 2018 with relative resilience, faces a more daunting challenge under the proposed tariffs of his second administration. Trump’s plan to impose a universal tariff of 10% to 20% on all imports, along with specific measures such as a 60% tariff on Chinese goods and additional levies on Canadian and Mexican imports, could have far-reaching implications.
While the details of the new tariff policies remain uncertain, their broader scope and punitive nature make them more threatening than the earlier China-focused tariffs. In response to the 2018 tariffs, many retailers diversified their supplier networks, reducing China’s share of U.S. textile and apparel imports from 37% in 2017 to 26% last year. Countries like Vietnam, India, and Bangladesh became key alternatives. However, this strategic shift may not shield retailers entirely from the economic strain of more comprehensive tariffs.
The impact of tariffs on retail prices is well-documented. For instance, a 20% tariff on imported residential washing machines in 2018 led to a nearly 12% price increase for consumers, as per a 2019 Federal Reserve and University of Chicago study. Contrary to Trump’s assertions, U.S. importers, not foreign exporters, bore the financial burden, a finding echoed by the U.S. International Trade Commission.
Retailers may find it harder to pass new tariff costs onto consumers this time. Discretionary categories like apparel and toys, which have long faced pricing pressures, are particularly vulnerable. Inflation-weary shoppers are increasingly discount-driven, with brands like Vans, Birkenstock, Sephora, and Victoria’s Secret PINK doubling their Black Friday online promotions compared to the previous year, according to BMO Capital Markets.
Need-based categories, such as auto parts and home goods, may fare slightly better. Analysts at Evercore suggest these segments have stronger pricing power, mitigating some earnings impacts. Nonetheless, operating margins for apparel and accessory retailers have already fallen below pre-pandemic levels, signaling limited room to absorb additional costs.
The National Retail Federation estimates Trump’s proposed tariffs could raise costs for households by $362 to $624 annually across six key categories, including apparel, furniture, and appliances. Although proposed corporate tax cuts could offset some costs, the broader economic strain remains significant.
Retailers accustomed to price hikes during the pandemic’s demand surge now face a tougher market. Some may attempt further price increases, risking consumer alienation, while others might absorb the costs, hurting profits. Ultimately, someone—retailers, shareholders, or consumers—will bear the financial weight of these tariffs.
The retail industry, which weathered Donald Trump’s initial tariffs in 2018 with relative resilience, faces a more daunting challenge under the proposed tariffs of his second administration. Trump’s plan to impose a universal tariff of 10% to 20% on all imports, along with specific measures such as a 60% tariff on Chinese goods and additional levies on Canadian and Mexican imports, could have far-reaching implications.
While the details of the new tariff policies remain uncertain, their broader scope and punitive nature make them more threatening than the earlier China-focused tariffs. In response to the 2018 tariffs, many retailers diversified their supplier networks, reducing China’s share of U.S. textile and apparel imports from 37% in 2017 to 26% last year. Countries like Vietnam, India, and Bangladesh became key alternatives. However, this strategic shift may not shield retailers entirely from the economic strain of more comprehensive tariffs.
The impact of tariffs on retail prices is well-documented. For instance, a 20% tariff on imported residential washing machines in 2018 led to a nearly 12% price increase for consumers, as per a 2019 Federal Reserve and University of Chicago study. Contrary to Trump’s assertions, U.S. importers, not foreign exporters, bore the financial burden, a finding echoed by the U.S. International Trade Commission.
Retailers may find it harder to pass new tariff costs onto consumers this time. Discretionary categories like apparel and toys, which have long faced pricing pressures, are particularly vulnerable. Inflation-weary shoppers are increasingly discount-driven, with brands like Vans, Birkenstock, Sephora, and Victoria’s Secret PINK doubling their Black Friday online promotions compared to the previous year, according to BMO Capital Markets.
Need-based categories, such as auto parts and home goods, may fare slightly better. Analysts at Evercore suggest these segments have stronger pricing power, mitigating some earnings impacts. Nonetheless, operating margins for apparel and accessory retailers have already fallen below pre-pandemic levels, signaling limited room to absorb additional costs.
The National Retail Federation estimates Trump’s proposed tariffs could raise costs for households by $362 to $624 annually across six key categories, including apparel, furniture, and appliances. Although proposed corporate tax cuts could offset some costs, the broader economic strain remains significant.
Retailers accustomed to price hikes during the pandemic’s demand surge now face a tougher market. Some may attempt further price increases, risking consumer alienation, while others might absorb the costs, hurting profits. Ultimately, someone—retailers, shareholders, or consumers—will bear the financial weight of these tariffs.
