Trade

Trump’s Tariffs Could Trigger a Second, Bigger Retail Apocalypse

JM Ashby
Written by JM Ashby

The so-called "retail apocalypse" peaked in 2017 when almost 9,000 brick and mortar stores closed, but Trump's next round of tariffs on all remaining Chinese goods not already subject to tariffs could trigger a bigger wave of closures over the next year.

Although Trump's tariffs on over $250 billion in Chinese goods have already been on the books for a year, those tariffs were imposed on a wide range of industrial goods and equipment that average people do not buy on a regular basis. With some exceptions, previous tariffs did not hit consumer products.

Trump's next round of tariffs on $300 million in Chinese goods will be different. These tariffs will be imposed on consumer goods and average American will begin to see higher prices on store shelves.

The retail lobby is warning that Trump's next round of tariffs will hit consumers directly and, if Trump increases the size of these tariffs as much as he has threatened to, it could lead to 12,000 store closures in 2020, up from 7,500 in 2019.

"The list of products these tariffs will hit are almost entirely consumer oriented," Hun Quach, vice president of international trade for the Retail Industry Leaders Association, said in a statement. "This new 10% tariff on Chinese imports is a direct hit on consumer products and family budgets, plain and simple."

A UBS analysis from May estimated that a 25% tariff on remaining Chinese imports — which is the group of goods targeted by Trump — could trigger 12,000 store closings over the next year.

So far in 2019, retailers have announced more than 7,500 store closings, which is higher than the number of closings from all of last year.

Trump's tariffs on remaining Chinese goods will begin at 10 percent on September 1st, but Trump has said his tariffs will remain at 10 percent for a "short period of time" and will gradually increase to 25 percent and possibly even higher.

I don't view higher tariffs as much of a 'possibility' as I do an inevitability.

If it proves to be true that Trump's trade war will not end until he's out of office, that gives him more than a year of time to fidget and fiddle with the global economy. Trump was incapable of keeping his tariffs to himself for more than four weeks after declaring a "truce" with Chinese President Xi Jinping and there's a lot of weeks left between today and the 2020 election.

I doubt Trump will even make it to Thanksgiving without raising his tariffs from 10 to 25 percent. And even that may be too generous. Can he make it to Halloween? An actual War on Christmas is coming.