Will the White House listen to warnings from Walmart, others about tariffs?

Discussion
Photo: Getty Images
Sep 24, 2018
Tom Ryan

Scores of retailers have written letters to the U.S. Trade Representative (USTR) warning that the newest round of tariffs threatens the U.S. economy’s growth and will cause consumers to pay exponentially more on a variety of goods. To no avail, the tariffs are scheduled to go into effect today.

The administration has been steadily imposing tariffs on China over the alleged theft of intellectual property, but this would be the first to hit a wide range of consumer goods.

The latest round, effective Sept. 24, imposes levies on an additional $200 billion of Chinese imports ranging from detergent to luggage. The rates start at 10 percent and rise to 25 percent at the start of 2019.

“Should the tariffs go into effect, Walmart customers will face cost increases for essential items like car seats, cribs, backpacks, hats, pet products and bicycles,” Walmart wrote in a Sept. 6 letter that was made public last week. “Either consumers will pay more, suppliers will receive less, retail margins will be lower, or consumers will buy fewer products or forego purchases altogether.”

Walmart said two-thirds of its spending on merchandise sold in the U.S. goes to items that are grown, made or composed of parts produced in America and its pledge to spend another $250 billion on products “that support American jobs” by 2023 may be in jeopardy.

Dollar Tree CEO Gary Philbin in a letter argued that the tariffs would seriously harm its customers, “many of whom are low-income and rely on our stores for their daily necessities.”

The USTR has received almost 6,200 comment letters on the tariffs.

The National Retail Federation and more than 100 groups have launched Americans for Free Trade that plans to hold meetings this week in Chicago, Nashville, Pennsylvania and Ohio. Grassroots outreach to Congress and the administration, social media and digital advertising are also planned.

Retailers, which order their products six months to a year in advance, are said to be scrambling to find new options for 2019.

DISCUSSION QUESTIONS: What’s the next step or plan B strategy for retailers now that major tariffs have arrived? How should retailers roll out and explain to consumers any unavoidable prices hikes?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"The only real option is to make the case for lifting tariffs once and hope for the best."
"The real cost of tariffs is in the opportunities lost and innovations delayed. Something to think about ..."
"Retailers are going to have to decide whether they try to respond to this with short term solution or really dig in and consider that this might be the new normal."

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16 Comments on "Will the White House listen to warnings from Walmart, others about tariffs?"


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Neil Saunders
BrainTrust

It will be interesting to see how this plays out as retailers are in a tough spot. Many would love to pass cost increases across wholesale however, I doubt that many will. The environment is too competitive to allow for this.

The net result of this will end up being some price increases for consumers, some margin erosion for retailers and suppliers, and another round of cost cutting — which might include further automation and job losses. All of those things are economically damaging, albeit in different ways.

Dr. Stephen Needel
BrainTrust

Retailers should do just what Walmart has done – make it known that these political actions will raise the cost of goods. If consumers don’t like that, they can buy less expensive goods or urge their representatives to change the political environment. Key – put the blame on politicians, not the retailer.

Paula Rosenblum
BrainTrust

Well, they have a problem now, don’t they? I think the tariffs are going to get rolled back…not because retailers worry about them, but because major GOP donors don’t want to see them. They like globalism. Will they get rolled back in time for the holiday season? I think so.

There’s a lesson here for the NRF. You dance with the devil by applauding a nice tax deduction for corporations, you’re going to find yourself doing some unfortunate twirls later when the tariffs come. Honestly, the trade association should have known better and stayed the heck out of it entirely. Now, the whole industry has a problem.

Cathy Hotka
BrainTrust

Elections have consequences. Many retailers (and their trade associations) applauded the result of the 2016 election because they wanted tax cuts for big business. With them, they also got the tariffs that this president promised. I’m playing the very smallest of violins.

Paula Rosenblum
BrainTrust

…and they certainly found a way to use the tax cuts. Within the world of shareholders.

Mark Ryski
BrainTrust

There is no obvious Plan B and that’s why we’re hearing such loud opposition from major retailers – but I’m not sure it will have much impact. It’s clear that the administration is hell-bent on its trade strategy and the retailers’ opposition is merely more collateral fallout. I’m not sure there’s much for retailers to say – since virtually everyone’s costs are going up, virtually everyone’s prices will too, so it’s more or less a wash. The tariffs will be borne by consumers.

Gene Detroyer
BrainTrust

It would be foolish for retailers to cut margins. The only rationale and long term solution for a retailer (and a manufacturer) is to pass on the additional costs just as they would all additional costs.

How should they explain? Make it loud and clear that the new prices are the effect of tariffs. Too many people I talk to think the exporting countries are paying the tariffs. They do not understand that they are paying the tariffs and tariffs are no more than a tax on American consumers.

Ryan Mathews
BrainTrust
First of all, we really don’t have a trade policy … we have a series of ephemeral trade policies based on who last whispered in the President’s ear. If it was the Chinese and they said nice things about him the tariffs could disappear faster than you can Tweet about it. Secondly, this is a Republican Administration that not only doesn’t believe in free markets, but singles out individual companies for praise and/or blame — Ford, Carrier, Harley-Davidson, etc., etc. So, as retailers take a stand in favor of their customers or businesses they may find themselves in the crosshairs of the White House, and that’s been a particularly tough place to be for some companies. So, there are Plans B, C, D, etc. but they only make sense if you assume the federal trade policies are consistent and rational — which they clearly are not. The option of running to the public and complaining about the President isn’t a very good one either. Not only are retailers opting for this course likely to get… Read more »
Gene Detroyer
BrainTrust

Don’t attack the administration. Just explain why the prices are increasing.

Ron Margulis
BrainTrust

Answering the question in the headline first: no, the White House will not listen to warnings from Walmart and others about tariffs. The administration didn’t listen to Gary Cohn, its own former Director of the National Economic Council, about tariffs, so I see no reason to believe the effort currently under way by NRF will bear any fruit.

That being written, it is now up to the retailers to explain clearly why prices will be going up this holiday season. In the name of non-partisanship this probably should happen after the midterm elections, but we may be past non-partisanship.

On a related note, I had a professor at NYU grad school who was one of the world’s foremost experts on the impact of tariffs and he taught us there are no winnable trade wars and that ultimately everyone loses. Not necessarily due to the higher prices, although that certainly impacts inflation. No, the real cost of tariffs is in the opportunities lost and innovations delayed. Something to think about …

Gene Detroyer
BrainTrust

Very smart professor. I suspect he was not coming from opinion, but from the decades of data that exist.

gordon arnold
Guest

I wonder if it will be more difficult to explain price hikes to the investors than to the consumer. Walmart only sells price. As prices rise the benefit dwindles especially for replenishing commodity needs. Price increases could push shopping convenience and time savings ahead of seemingly smaller savings as a new priority. This will no doubt give a much needed infusion to the e-commerce businesses out there. Change is good or bad as a matter of perspective and fact. Plan B should include buckling up for the boat ride down that famous river.

Peter Charness
BrainTrust

White House … listen (and act rationally)? I fear that this one is the frog in boiling water. The costs to consumers will rise, but not in the short term. Who knows when the connection between the tariffs and the cost of living will become clear to the voting blocks?

Ed Rosenbaum
BrainTrust

A political issue that is going to create red “thumbs down” across our board. So let me move forward to my share of the “thumbs down.” I was opposed to the tariffs from the start. Yes, there may have been a reason to go in this direction. But I think tariffs should have been the last step, not one of the first. This will have negative effects on more than the holiday season. And it might have a strong influence on the sales success (or not) of the season. China does not appear to be blinking.

Jeff Miller
BrainTrust

It is interesting that a very short-term oriented current executive branch is trying a trade/economic strategy that really only works in the long term. Retailers are going to have to decide whether they try to respond to this with short term solution or really dig in and consider that this might be the new normal. Retailers with existing problems who now have to consider raising prices or lowering margins will probably be more swiftly bankrupted. Imagine if a retailer like Toys “R” Us was still around — this would be a dagger and I imagine there are retailers who are in similar spots. The choice between higher prices to shoppers who can just go to Amazon or lower margins is brutal.

Trevor Sumner
Guest

There’s too much rhetoric for either country to back down until there is real pain. Whether this is a smart strategy or not, it’s going to be pushed until either China backs down or the pain in America is so acute and well publicized for a period of time that it affects voters. And right now the percentage of Americans who think the economy is the number one issue is at a decades long low. I see this playing out for quite some time, even as retailers amplify their concerns and increased prices affect earnings for a couple quarters.

wpDiscuz
Braintrust
"The only real option is to make the case for lifting tariffs once and hope for the best."
"The real cost of tariffs is in the opportunities lost and innovations delayed. Something to think about ..."
"Retailers are going to have to decide whether they try to respond to this with short term solution or really dig in and consider that this might be the new normal."

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