Retailers wrestle with a volatile trade policy with China
NEW YORK (AP) — Lance Ruttenberg knows too well how fast President Donald Trump’s China trade policies can change.
As president and CEO of American Textile Co., he and his team spent weeks on a comprehensive study analyzing how a 10% tariff set for Sept. 1 would affect their business, which makes thousands of bedding items for hundreds of retailers.
Then on Tuesday, Ruttenberg learned the tariffs on his type of goods would be delayed until the holidays. And while the news brought momentary relief, he’s still trying to sort out what it all means.
“Everybody is in a confused state,” Ruttenberg said. “We are not afraid of challenges. But it’s hard to address challenges when you have no ability to predict them or anticipate them. This constant uncertainty is a terrible burden to navigate.”
Welcome to the world of Trump’s tariff wars with China, which can turn everything upside-down with just a presidential tweet.
Trying to run a business when the administration’s trade policy continues to shift almost daily has been difficult, and many retailers and consumer product makers like American Textile say they’re devoting so much time adjusting to each whim that they can’t focus on other areas like developing innovative products.
Items targeted for tariffs pop up on one list, only to be dropped months later or vice versa. Meanwhile, businesses are left to change their supply network modeling as often as weekly instead of semi-annually or annually, says Fred Baumann, global group vice president at JDA, a technology company that works with retailers on their sourcing network.
Company executives also complain that it’s hard to offer financial forecasts, which in turn makes it more difficult to get loans.
“It’s very frustrating,” said David French, senior vice president of government relations at the National Retail Federation, the nation’s largest retail trade group. “Retailers want to get back to competing and driving customers to their stores. Retailers want to be investing to become better retailers, not moving around their supply chain that is subject to a presidential tweet.”
Trump has already imposed 25% tariffs on $250 billion in Chinese imports. The 10% tariffs on about another $300 billion would extend import taxes to just about everything China ships to the United States.
The new tariffs are likely to be a game changer: The earlier ones were designed to limit the impact on consumers by targeting industrial goods. The next ones, which target items such as toys and clothing, will hit families in the pocketbook.
Mindful that the latest round of tariffs would raise consumer prices during the crucial holiday shopping season, the administration delayed nearly 60% of them until Dec. 15.
Businesses say they spent hours culling through the lists to see which items were delayed and which weren’t. Meanwhile, analysts will be dissecting comments by retailers over the next couple of weeks when they report fiscal second-quarter earnings to see how the tariffs have been playing out.
Many have not incorporated the last round of tariffs into their financial guidance given the uncertainty. But Macy’s raised a red flag Wednesday when it said shoppers don’t have an appetite for higher prices in a ballooning trade war.
The department store chain was forced to raise prices on some luggage, housewares and furniture to offset the costs of the 25% tariff implemented in May and its CEO Jeff Gennette says the retailer is working hard to offset the looming costs of tariffs on shoes and clothing.
Walmart said Thursday that its team has been able to manage pricing and profit margins, and is currently reviewing the list of tariffs published by the United States Trade Representative on Tuesday. It boosted its annual earnings guidance and said that the outlook reflects its current understanding of the timing of the tariffs.
Jay Foreman, CEO of Basic Fun, based in Boca Raton, Florida, said that if the 10% tariffs had kicked in in September as previously planned, he would have had to raise prices as well as lay off workers. He also had letters of intent to buy two companies and wasn’t sure if he would have to postpone the acquisitions.
Now with the December delay, he has a little bit more time to work with retailers to negotiate prices for next spring. But he says it’s taking a lot of time out of his schedule to innovate.
Joseph Shamie, president of Delta Children, a New York-based maker of children’s cribs and other baby furniture, said he had already negotiated the costs that retailers, factories as well as his own company would absorb to offset the 10% tariffs he thought would happen this fall. Now, he will have to renegotiate.
“We really thought it would go away,” Shamie said. “Maybe we were naive.”
AP Economics Writer Paul Wiseman in Washington contributed to this report.
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