Big Retailers Issue Dire Warnings On Tariffs

A customer exits after shopping at a Macy's store in the Brooklyn borough of New York, May 11, 2017. Photo: REUTERS/Brendan McDermid

By Daniel B. Kline, The Motley Fool.

Most retailers have tried to stay away from politics. That's a lesson Target (NYSE:TGT) learned the hard way when it faced boycotts over its bathroom-use policy, and it's something Starbucks (which has dipped its toe into a few political issues) deals with every year when it issues its holiday cups.

In a nation that has become sharply divided on some issues, many companies have attempted to stay above the political fray. That makes it especially noteworthy that a group of roughly 300 retailers -- including Target, Walmart, Dollar Tree, Kohl's, Macy's, and Sears -- sent a letter to United States Trade Representative (USTR) Robert Lighthizer opposing President Donald Trump's 10%-25% tariffs on $200 million in imported Chinese goods. The National Retail Federation (NRF) also sent the USTR a letter opposing the recently enacted tariffs.

Call it safety in numbers: By taking a joint stance, retailers are trying to put the focus on customer impact instead of being seen as opposing the president.

What are retailers saying?

"Millions of U.S. jobs in our industry's global value chains -- including those in research and design, supply chain, manufacturing, compliance, logistics, and retail -- would be put at risk if a new 10% or 25% tax were imposed, due to fewer sales, less investment, and cost increases throughout U.S. supply chains," the group wrote.

The letter made it clear that the co-signing retailers preferred using "targeted trade remedies against intellectual property theft and other proven trade violations." It also said point blank that the tariffs would "disproportionately" hurt U.S. consumers, workers, and companies, noting that the tariffs aren't paid by China exporters, but by the U.S. companies importing the goods.

"We cannot simply shift our supply chains outside of China without massive disruption and cost increases due to materials availability, quality, compliance, and capacity in other countries," the group wrote. "Moreover, because China accounts for such a large percentage of imports for consumption or further manufacturing, any additional tariffs would likely translate into added costs and price increases in the United States."

In addition to causing price increases, the letter's co-signers also warned that jobs would be lost in "research and design, supply chain, manufacturing, compliance, logistics, and retail" due to the tariffs.

What does this mean for consumers?

Prices will rise if the tariffs stay in place -- many retailers won't be able to find alternative suppliers, and the ones they can find will cost more. The increase won't be immediate, but they will be rolled out over time as shelves get filled with goods impacted by the tariffs after current stock sells out.

Taking a stand may be politically risky, but it's important for companies to share how this will impact consumers, especially with the holiday season right around the corner. These actions may not impact any decisions on tariffs moving forward, but that does not mean companies should not continue to speak out on the issue, if only to inform consumers how the situation will impact them.

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