Retail Alert – Trump’s Party Is Looking At Your Supply Chain
![Retail Alert – Trump’s Party Is Looking At Your Supply Chain Retail Alert – Trump’s Party Is Looking At Your Supply Chain](https://i1.wp.com/imageio.forbes.com/specials-images/imageserve/669dc46435f6506279aaab39/0x0.jpg?format=jpg&height=900&width=1600&fit=bounds&w=780&resize=780,470&ssl=1)
Horizontal photo of the words: “TRADE WARS” in black letters with the U.S. FLAG and the CHINESE FLAG … [+]
The Republican National Convention had some interesting ideas in Milwaukee last week, but they surely pushed America’s retail community to be on high alert for their soon-to-be endangered supply chains. Republican platform chapters #3 and #5 are staunchly pro-American, but clearly anti-trade.
While it may be common to trash talk international trade during a campaign rally, this sensitive topic elevates to a whole new level when tariffs and sourcing locations are ensconced within a political platform. Retailers are taking note, and some are altering their future plans.
Chapter #3 of the Republican platform tends to be more cautionary and progressive – talking about “Fair and Reciprocal Trade Deals” which is not necessarily a bone of contention, and something that Team Biden/Harris had been lacking.
While it is true that former President Trump was disruptive to international trade, he did achieve positive results by updating NAFTA with USMCA and also (initially) with the China Phase One Trade deal. On the negative side, the former President created inflationary tariffs which resulted in some supply chains that ultimately collapsed.
Team Biden/Harris, on the other hand, for fear of looking weak on China policy, continued with Trump’s unpopular retail tariffs while slow-walking any new international trade. To date, the administration has yet to achieve anything positive on trade. They also remained on the sidelines while GSP and MTB expired, and have been (reasonably) absent in the movement to early renew AGOA/Haiti. In summary, while Trump is probably guilty of doing too much on trade, it’s fair to say that Biden/Harris has done too little.
Chapter #5 is the true Republican platform item of concern for retailers. Under the guise of an “America First” Economic Policy – established to protect American workers and farmers from unfair trade – the goal is to rebalance trade, secure strategic independence, and revitalize domestic manufacturing. Certainly, this sounds promising, but the platform goes on to indicate that they will support baseline tariffs and pass the “Trump Reciprocal Trade Act” (matching tariffs to other countries). This item also says: “As tariffs on foreign producers go up, taxes on American works, Families, and Businesses can come down.” For retailers who source from China, item #2 in Chapter #5 indicates that Republicans plan to revoke China’s Most Favored Nation status and phase out imports of essential goods. This, of course, would be highly inflationary to the American consumer, and will force those who source from China to find alternative countries because options for “made in America” in certain retail categories remain limited – especially for low cost/high labor items like apparel and footwear.
Retailers are well aware that former President Trump has expressed interest to slap a 10% tariff on all imports (from all countries) and are also painfully aware of a proposed 60% tariff on China imports. Even knowing all this, many retailers are still in denial, and haven’t yet decided what actions they would need to protect their supply chains. Truth be told, when candidate Trump became President Trump – the trade wars and tariffs did happen, so it is entirely likely, that (if re-elected) the former President will focus on tariffs – and this will be one of his higher priorities. The problem in this scenario – is that lower income households will be punished, while higher income individuals will be less affected because the price of lower cost commodity items will certainly rise. Trump also floated the idea of swapping income tax for tariffs which, while not a new idea, would be even more painful for lower income individuals.
In the 1800’s the American government was actually financed by tariffs on imports – until income tax was first introduced in 1913. So, when former President Trump hints that he might want to do away with income tax and replace it with tariffs – this idea has actually been tried before. However, that being said, the world has changed a bit since 1913, and pulling this “switch” would likely be catastrophic for the economy by creating an unfathomable tariff rate – possibly higher than 70%.
In this day and age, alternating patterns for capital outlays in the world of international cooperation, and any change to consumer spending habits – remains disruptive to retail trade. The former President likes to talk tariffs and, by now, everyone has had a good idea of their inflationary powers and their ability to disrupt existing supply chains. One can be assured that, if re-elected, tariffs will play a central role in a Trump second term – primarily as a tool of foreign policy – and likely directed towards China.
Retailers are a savvy bunch. They analyze the terrain, adapt and survive. However, in the current economic environment (especially with high interest rates), being any size of a retailer remains quite difficult. If an administration were to be retail favorable, they would need to focus on international trade relationships, with product sourcing that is neither dangerous nor burdensome. It’s one thing for an administration to advise retailers, brands, and sourcing groups to exit China, but when they block the exit doors of access to other countries – than only a rough road can lie ahead.
When the Smoot-Hawley tariffs were enacted in June of 1930, following a similar protectionist path (like the Republican platform is currently on), these actions enabled the great depression by raising the cost of goods. As a reminder to all who might miss the point, it was during that time period that the great American humorist Will Rogers said: “When Wall Street took that tailspin, you had to stand in line to get a window to jump out of.”
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