For retailers and consumers finally feeling some relief from inflation, President-elect Donald Trump’s tariffs proposal introduces fresh uncertainty around how prices could change during his presidency, analysts said Wednesday.
Companies, retail trade groups and industry analysts have warned the move could fuel higher prices on a wide range of Americans’ purchases such as sneakers and party supplies.
“Despite Trump’s assertions to the contrary, tariffs are paid by the companies or entities importing goods and not by the countries themselves.
Deep discounters, such as Dollar Tree , are also exposed because their fixed-price-point business model makes it difficult to pass on higher prices to customers, said Peter Keith, a senior research analyst at Piper Sandler.
Some companies, including AutoZone , have already told investors that they will raise prices to cover the additional costs.
President-elect Donald Trump’s proposed tariffs raise new questions about how prices may fluctuate under his administration, analysts said Wednesday, despite retailers and consumers finally experiencing some respite from inflation.
During his presidential campaign, Trump, who NBC News predicts will win a resounding victory and a second term, declared that he would impose a 10–20% tariff on all imports, with tariffs as high as 60–100% for Chinese goods.
Businesses, retail trade associations, and industry experts have cautioned that the action may lead to increased costs for a variety of items that Americans buy, including party supplies and sneakers.
In a statement released Wednesday, Matthew Shay, CEO of the National Retail Federation, said, “The imposition of universal tariffs on consumer goods and other non-strategic imports is a tax on American families.”. Job losses will follow, along with price increases and inflation. “”.
In a study published earlier this week, the NRF predicted that Trump’s proposed tariff increases would cause “dramatic” double-digit percentage price increases in almost all six of the retail categories it studies. These include clothing, shoes, furniture, appliances, travel gear, and toys.
For instance, the study discovered that the price of apparel might increase by 12–5% to 20–6%.
The executive director of E. l. f. Beauty, which mostly sources its cosmetics from China, told CNBC in an interview on Wednesday that it might have to increase prices if the proposed tariff hikes go into effect.
“We do have the ability to set prices. E stated, “We would use pricing leverage if we saw the need to do so. I. F. Tarang Amin, the CEO. “It will rely on our perception of the tariffs.”. It is contingent upon the size of the tariffs. “.”.
Neil Saunders, managing director of GlobalData, stated in a research note on Wednesday that tariff increases would “create an enormous headache” for retailers, who would then probably pass those costs on to customers. Those consumers who are already price conscious are likely to spend less as a result.
Tariffs are paid by the businesses or organizations importing goods, not by the nations themselves, notwithstanding Trump’s claims to the contrary. This implies a significant increase in the price of purchasing goods directly or as a raw material for production from abroad, according to Saunders.
“A strict tariff policy would initially mean retailers taking a massive hit on profits or being forced to put up prices, which would fuel inflation and dampen retail volume growth,” he said, referring to the trade between Chinese manufacturers and US retailers.
According to Saunders, this change in tariff policy would be “incredibly disruptive” in the short term but would eventually be adjusted by supply chains.
He stated, “The small hope is that what is finally implemented will be relatively modest in scope and that the tough talk on tariffs is more of a negotiating ploy.”.
Depending on the origin of their products and whether they have the popularity and pricing power to raise prices or drive higher profit margins, a retailer may or may not be negatively impacted by proposed tariff increases.
According to a research note from the Bank of America, retail analyst Lorraine Hutchinson stated that American Eagle Outfitters, Crocs, Skechers, Amer Sports, and Five Below are more vulnerable because at least 20% of their products come from China. She lowered her Five Below stock rating from neutral to underperform as a result, stating that the company lacks “the pricing power to mitigate hefty tariffs.”. “”.
However, Hutchinson stated that businesses such as Bath and Body Works, which sources approximately 85% of its products from North America, would be less at risk.
According to her, retailers may profit from Trump’s corporate tax cuts, but the tax savings would be offset by high tariffs.
According to Peter Keith, a senior research analyst at Piper Sandler, deep discounters like Dollar Tree are also vulnerable because it is challenging for them to pass on higher prices to customers due to their fixed-price-point business model. With set prices of $1.25, the store imports a lot of its items from China and sells luxuries like toys and party hats. Therefore, he said, the business must either absorb increased expenses or completely rethink its pricing strategy.
Yeti Holdings was also downgraded from buy to neutral by Bank of America due to its significant exposure to China. But unlike Dollar Tree, it might have enough wiggle room to raise prices or absorb cost increases thanks to its larger profit margin and fan base.
Keith of Piper Sandler pointed out that although Yeti’s 20-ounce tumblers normally retail for $35, the company has a roughly 60% margin on the product.
In addition, Yeti and other businesses have been attempting to relocate their manufacturing outside of China and diversify their supply chains in order to become less dependent on the area and its hazards. Yeti has committed to shifting roughly half of its production to non-Chinese regions by the end of 2025.
D. l. f. has adopted a comparable strategy, CEO Amin stated.
“Nearly all of our production was in China back in 2019 when 25 percent tariffs came in,” Amin said, alluding to tariff increases that Trump implemented during his first term in office. We have supplies in other regions of Asia and the United States because we have been diversifying. S. in Europe. Currently, less than 80% of our supply comes from China, and I anticipate that percentage will decline slightly in the future. “”.
section of E. I. f. offers luxury goods at a discount, which is part of its value proposition. However, Amin stated that he is not concerned about customers switching to other brands if the company decides to raise prices. He cited its well-known lip oil, which retails for $8, and its closest substitute, Dior’s Lip Glow Oil, which costs $40.
“I even questioned our group about why we priced it at $8 when we ought to have done so at $10,” Amin said. I might therefore have my chance now, but we’ll see. “”.
As inflation slows, tariffs may cause consumers to experience more sticker shock on a wide range of purchases, from toys to auto repairs. AutoZone is among the companies that have already informed investors that they will increase their prices in order to cover the additional expenses.
Philip Daniele, the CEO of AutoZone, stated during a late September earnings call that “if we receive tariffs, we will pass those tariff costs back to the consumer.”. According to him, the business usually raises prices before tariffs take effect.
Tariffs could also increase the price that consumers paid for a pack of Oreos, a bottle of Scotch, or a six-pack of beer.
A few companies were identified by analysts from TD Cowen, an equity research firm, as being at risk. These companies include Constellation Brands, which produces Corona Extra and Modelo Especial beers; Diageo, a liquor company that imports tequila from Mexico and Scotch from Scotland; and Mondelez, which produces some of its cookies and snacks in Mexico.
If Trump’s proposed tariffs are implemented, adult and children’s shoes will also cost more, according to Matt Priest, CEO of Footwear Distributors and Retailers of America, a trade association that includes Nike, Walmart, and other companies.
approximately 99 percent of all shoes sold in the United States. A. He claimed that even if a cost penalty were added, it would be challenging to bring a sizable portion of that production back to the United States because it is manufactured abroad.
We don’t think we’ll be able to figure out how to produce 2.5 billion pairs of shoes in the United States. S. . “Every year,” he said.
He declared that “the rate of inflation is declining.”. At a time when consumers are telling us, both politically about last night’s results and from a consumer standpoint, “We don’t want higher prices,” it would be counterproductive to go back to using one of those inflationary levers, which would be additional tariffs. ‘.”.
