The latest tariffs imposed by U.S. President Donald J. Trump will have fewer impacts on many apparel brands and present greater issues for retailers.
Compared with tariffs he imposed during his first term, the new duties are bigger as Trump seeks to exert pressure on Mexico, Canada, and China to stop illegal migration and the flow of fentanyl into the U.S. The 25 percent tariff on Mexican and Canadian imports are sweeping, with few exceptions.
More from Sourcing Journal
-
E-Comm Escalation? USPS Suspends Service on US-Bound Parcels From China
-
Following Trump Edict, China Hits Back With Tariffs of Its Own
-
Trump's Trade Policies Could Spur Modest Stagflation in US Economy
Currently, the tariff on Mexican imports are delayed by 30 days after Mexican President Claudia Sheinbaum agreed on Monday to send 10,000 troops to her border to prevent drug trafficking. Tariffs on most Canadian imports were set to start on Tuesday, with energy resources having a lower tariff of 10 percent. Late Monday, Trump agreed to pause implementation of the Canadian tariffs, also for a period of 30 days. The delay was due to Canada’s agreement to take measures to curtail the border flow of fentanyl into the U.S. And while Canadian Prime Minister Justin Trudeau had slapped a 25 percent retaliatory duty on American-made goods ranging from apparel to footwear, home and furniture, it is presumed that those duties are on hold as well. The 10 percent tariffs on all Chinese imports—on top of existing tariffs—are also slated to begin on Tuesday.
For fashion brands, Jefferies equity analyst Ashley Helgans said firms under her coverage range have “limited sourcing exposure to China” at 10 percent or less. The analyst said Tapestry Inc. and Ralph Lauren Corp. have the ability to continue to raise prices to mitigate any cost impacts.
“Companies also have become increasingly agile since the pandemic in diversifying sourcing,” Helgans said.
She concluded that department stores such as Kohl’s Corp. and Macy’s Inc. will see more risk to their top-and-bottom lines. That’s because they are value-focused and have consumers who are more susceptible to inflationary pressures from increased tariffs on imports. Helgan noted that Kohl’s in 2019 said it had “slightly more than 20 percent China sourcing exposure.”
For other fashion brands, the analyst said Capri Holdings Ltd. has less than 5 percent China exposure, while PVH Corp. noted in 2019 its exposure back was between 10 percent to 12 percent. For footwear, VF Corp. said recently its China exposure was minimal, with the analyst noting that in 2019 the company has predicted U.S. imports from China would be 4 percent in 2020.