Trump’s China tariff dispute leaves retail and consumer brands in limbo

With the uncertain trade climate, Williams-Sonoma is already assuming tariffs on a wide range of home goods imported from China will rise to 25 percent in 2019.

Steps to mitigate the impact of tariffs have included moving “a ton” of sourcing out of China, implementing price increases, shifting upholstery tasks to the U.S. and consolidating trade partner contracts. Williams-Sonoma in fact baked a 25 percent tariff rate into its 2019 guidance.

“Between all these moves and also some mix shifts and some selective price increases, we’re prepared for the worst,” CEO Laura Alber said March 20 on the retailer’s fourth-quarter conference call.

Williams-Sonoma has taken these actions despite the Trump administration’s decision for the second time not to raise tariffs on March 1 on $200 billion of Chinese imports from 10 percent to 25 percent as trade negotiations progressed.

So far, a limited range of consumer goods, including furniture, digital cameras and accessories like handbags, luggage and sports gloves, are subject to the 10 percent tariffs. Apparel and footwear, for now, are excluded.

Most publicly held retailers and vendors are assuming the tariff rate will remain at 10 percent and that tariffs on other items aren’t coming. Many, however, have been further diversifying sourcing away from China since the trade dispute began last July. GoPro announced last December that it plans to move production of “most of its U.S.-bound cameras” out of China.

Other steps to mitigate any potential hit from tariffs have included bringing in goods early, reengineering product, re-costing factory contracts and optimizing logistics.

On his company’s conference call on March 27, Five Below’s CEO Joel Anderson said the retailer would explore price changes and “shifting even more product” to other regions should tariffs rise to 25 percent. He admitted, “It’s really early for me to speculate on this one. I mean, the tariff thing has been all over the map. It’s constantly changing.”

SOURCE: https://www.retailwire.com/discussion/trumps-china-tariff-dispute-leaves-retail-and-consumer-brands-in-limbo/

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