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(Bloomberg) -- Retail stocks soared after President Donald Trump said he’ll pause higher tariffs for 90 days for dozens of nations that haven’t imposed retaliatory measures on the US.
Countries getting a reprieve include several key suppliers for many apparel and sneaker makers. Critical production hubs including Vietnam, Indonesia and Cambodia have all expressed interest in negotiating trade deals with the US, but global supply chains remain in limbo until any new pacts are reached.
Shares of retailers broadly traded higher on Wednesday afternoon including Nike Inc., which rose 11%. Walmart Inc. closed up 9.5%, while Lululemon Athletica Inc. climbed 11% and Gap Inc. advanced 15%. The S&P 500 Consumer Discretionary Index posted its largest daily gain since 2008.
Trump’s about-face came roughly 13 hours after higher reciprocal duties on 56 nations and the European Union went into effect, a move that had fueled market turmoil and stoked recession fears.
Countries that were hit with the higher, reciprocal duties that went into effect at midnight will now be taxed at the earlier 10% baseline rate applied to other nations, with the exception of China, according to a White House official. China’s duties were raised to 125% over its refusal to negotiate.
The news is a positive development for retailers that have been shifting away from China into neighboring countries, said Poonam Goyal, an analyst at Bloomberg Intelligence. Sportswear brands, for instance, could largely mitigate a 10% tariff and can reroute production from China to Southeast Asia to avoid higher duties, Goyal said.
Retailers face the challenge of projecting their performance amid a rapidly-changing tariff landscape. Earlier this week, Levi Strauss & Co. projected sales growth without including any potential tariff impact, while Walmart on Wednesday largely reaffirmed its outlook.
Telsey Advisory Group analyst Joe Feldman said that it’s difficult to price models and estimates as tariff policies continue to change quickly.
“I don’t blame the retailers for not wanting to put numbers out there yet. It’s a moving target,” he said in an interview. “Today is an example where it’s not even worth trying.”
It’s still unclear how companies will mitigate the higher tariffs and how consumers will respond, Feldman said, adding that he generally expects estimates to tick down in the coming months. He said Walmart is better positioned to weather the uncertainties than other companies, since it sells basics such as groceries.
--With assistance from Janet Freund.
(Adds analysts comments starting in eighth paragraph.)