Sun, Apr 08, 2018 - Page 16 News List

US retailers brace for fallout from China trade dispute

Reuters, NEW YORK

Washington’s trade dispute with Beijing could hit US retailers if tariffs are implemented and lead to higher prices or a shortage of merchandise.

The threatened US tariffs could be little more than a negotiating tactic aimed at forcing China to address its intellectual property policies, but some retailers and apparel companies are sounding the alarm bells.

The two biggest categories of US imports from China last year were communications and computer equipment, totaling US$137 billion, US Census Bureau data showed.

Cellphones and computers, key portions of these categories, were spared from the initial tariffs list. Apparel and footwear, both labor-intensive industries in China, made up a combined US$39 billion in US imports.

“It’s this rhetoric around another US$100 billion in tariffs that concerns us, because certainly within that next pool of categories it would be hard to exclude apparel and footwear,” said Robert D’Loren, chief executive officer of Xcel Brands Inc, a clothing supplier to Macy’s Inc, Hudson’s Bay Co and others.

“If tariffs were to be introduced on apparel, the very next day I will be on a plane to China and I will be working with my factories, trim suppliers, mills to have each of us assess how much tighter we can work to deal with this,” he said.

Jonathan Gold, the National Retail Federation’s vice president for supply chain and customs policy, also said he was worried about what the new set of tariffs might entail.

“Our concern is that the new set of tariffs will turn to more consumer products not on the list and will now include things like apparel, home goods, shoes, all of those basic retail goods coming in from China,” Gold said.

“As companies make their buying decisions especially for the holiday season, which they do six, nine to 12 months in advance, they are trying to figure out how they will do this going forward,” he said.

Should a trade war ensue, retailers with vast global supply chains might suffer less than others. Costco Wholesale Corp, Walmart Inc, Home Depot Inc and Lowe’s Companies Inc, for example, have the ability to acquire products in multiple markets and could move to tap alternative markets such as Vietnam, Bangladesh or Colombia for merchandise.

Walmart has reduced its supply chain exposure to China “quite a bit” over the years, as lower cost goods became available out of Vietnam, while Costco has sourcing offices in a number of core markets beyond China, said Brandon Fletcher, an analyst at broker-dealer Sanford C. Bernstein.

In contrast, Best Buy Co Inc depends heavily on China to source smaller TV sets and other low-priced merchandise, and there are no easy alternative supply countries, he said.

Best Buy declined to comment on how the tariffs might impact the company’s supply chain.

At Dollar General Corp, a substantial amount of imported merchandise comes from China, a March 23 company filing said.

A spokesman for Dollar General declined comment.

At Target Corp, China is its single largest source of merchandise.

Target said in its annual report, the imposition of additional tariffs or duties on imported products could adversely affect its business.

“Like all companies, we are monitoring the situation very closely,” a Target spokeswoman said.

As the cost of making goods in China has gone up over the past decade, many retail and apparel companies have moved some production to Vietnam, Bangladesh and Indonesia.

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