- The US-China trade war has escalated dramatically over the past few weeks as the US and China have imposed fresh tariffs on billions of dollars’ worth of each other’s goods.
- Analysts are calling out the retailers and industries that they expect to be worst hit by the newest round of tariffs.
- Some retailers have spoken publicly about how they are preparing to weather the storm. And as the retail sector is in the midst of earnings season, the topic has been a focal point of analysts’ questions.
- Visit Business Insider’s homepage for more stories.
The US-China trade war has reached new levels, but the worst is not over yet.
Retailers are now bracing themselves for the prospect of yet more tariffs on $300 billion worth of Chinese goods.
Here’s who could be worst impacted by the new wave of tariffs – and eventually be forced to raise prices:
Apparel companies
In an earnings call earlier this month, Ralph Lauren CEO Patrice Louvet said that the company has a large exposure to tariffs. According to Bloomberg, around one-quarter of Ralph Lauren's products are from China.
"Think sweaters, polo shirts, some of our footwear," Louvet said in an interview on the call, Bloomberg reported. "As you can imagine, we are working on different scenarios, absolutely."
Rick Helfenbein, president and CEO of the American Apparel & Footwear Association, said in an interview with CNN that he and other people in the apparel industry are "scared and panicked" about the impact that the trade war could have.
Read more: Victoria's Secret got whacked by Trump's tariffs. Here's why fashion stocks are suffering.
Home-improvement stores
Analysts have previously called out Home Depot and Lowe's as retailers that are likely to be negatively impacted by tariffs in the future.
Wedbush analyst Seth Basham told Business Insider at the end of 2018 that tariff-driven costs could put pressure on these companies' margins and sales, as they both currently have "significant exposure" to tariffs.
In a recent call with analysts after reporting its first-quarter earnings, Edward Decker, executive vice president of merchandising, said the latest round of tariffs on $200 billion worth of Chinese goods would raise the annual cost of goods sold by about $1 billion.
Electronics sellers
Analysts are expecting electronics sellers to be badly hit by the new wave of tariffs.
Best Buy CEO Hubert Joly said on a recent earnings call that tariffs at 25% would result in price increases that "will be felt by US consumers."
Dollar stores
As dollar stores source a large portion of their inventory from China and have less room to increase prices, they are likely to be badly impacted by tariffs.
This is especially true for Dollar Tree, which is known for selling items for $1 or less and for operating on a low-margin, high-volume basis, which is dependent on low prices.
"The tariffs are more difficult for Dollar Tree than rivals because the company has a one-dimensional business model that is not easily flexed or changed," Neil Saunders, managing director of GlobalData Retail, told Business Insider in an email last year.
Saunders is referring to Dollar Tree's fixed $1 price point, which makes it almost impossible for it to increase costs on the consumer side without changing its entire business model. Moreover, as the very nature of its business is to be cost-cutting, there are very few ways to cut expenses elsewhere.
Sneaker brands
Bad news for sneakerheads - athletic footwear could be about to experience a significant price increase given that many of these products are imported from China.
To prepare for this, several of the largest sneaker companies, such as Nike, Adidas, and Under Armour, have been moving their manufacturing facilities away from China to minimize the impact of tariffs.
Recent research from Footwear Distributors and Retailers of America estimated that the average price of a pair of sneakers, pinpointed at $48.18, could increase by nearly $13, to $60.93.
Furniture makers
Furniture maker Williams-Sonoma, which also owns Pottery Barn and West Elm, has been prepping for the impact of tariffs.
CEO Laura Alber told CNBC on Monday that the company shifted some furniture production to Vietnam, Indonesia, and the US after Trump imposed a 10% duty on $200 billion worth of Chinese goods in 2018.
To keep consumer costs down, the company said it has been renegotiating contracts with manufacturers and looking at how it can reduce costs elsewhere in the business.
Department stores
In recent earnings calls, several leading US department stores chains addressed the impact of tariffs. This included Kohl's, JCPenney's, and Macy's.
Around 20% of Kohl's goods are made in China, according to the company. CEO Michelle Gass said that the company is now working closely with vendors to come up with a plan; it has adjusted its gross margin outlook for 2019 to account for the cost of tariffs.
JCPenney CEO Jill Soltau said that the proposed new round of tariffs would have a "meaningful" impact on both its national and private-label brands.
Macy's is in a similar position. While its CEO, Jeff Gennette, said that previous tariffs had no real impact on the company, new tariffs announced this month on $200 billion worth of Chinese imports likely would have an impact, specifically on its furniture business.