palinchak/Depositphotos.com
April 3, 2025
How Bad Are the ‘Reciprocal Tariffs’ for Retail?
Shares of retailers nosedived along with the broader market as the Trump administration’s sweeping reciprocal tariffs against U.S. trading partners drove up fears of reignited inflation and slowed growth.
President Donald Trump on Wednesday unveiled the centerpiece of his tariff agenda, saying he will impose a 10% across-the-board tariff on imports from all countries, effective April 5, and even higher rates of “reciprocal” levies, effective April 9, for other nations the White House considers bad actors on trade.
The White House based the new tariffs on its calculations of the fees and duties that other countries impose on U.S. goods. Trump said during a Rose Garden ceremony, “For decades, our country has been looted, pillaged, raped and plundered by nations near and far, both friend and foe alike.”
The tariffs were steeper than expected, as many market watchers were hopeful the ever-shifting tariff plans would just be a negotiating tactic.
Among the biggest shocks were the tariffs placed on Asian countries that make the bulk of consumer products. The list runs from apparel and footwear to furniture and consumer electronics.
Many manufacturers had already begun moving production away from China after Trump imposed tariffs on the country in 2018. However, several Asian countries where companies relocated their operations also faced significant tariffs, including Vietnam, 46%; Cambodia, 49%; India, 26%; Bangladesh, 37%; and Indonesia, 32%. China’s new 34% tariff comes in addition to the 20% tariff recently imposed over fentanyl. Other major trade partners hit with reciprocal levies included Europe, 20%; Japan, 24%; and South Korea, 25%.
Retailers are expected to pressure foreign suppliers to absorb some of the costs, but Target and Best Buy previously warned that an escalating trade war would lead to higher prices.
Jonathan Gold, VP of supply chain and customs policy at the National Retail Federation, told Yahoo! Finance that given the uncertainty and brief deadline, retailers didn’t have enough time to “really plan and prepare.” However, moves to find cheaper sourcing even in the medium-term are limited with most countries hit by reciprocal tariffs.
Trump’s rationale is that tariffs will resuscitate U.S. manufacturing, cut the U.S. trade deficit, and help reduce the national debt. White House officials further claim tariffs will not meaningfully contribute to inflation. In a statement to CNBC, Stephen Miran, chair of the Council of Economic Advisers, said, “As the world’s largest source of consumer demand, the U.S. holds all the leverage, which means foreign suppliers will have to eat the economic burden or ‘incidence’ of the tariffs.”
While several economists warned after Wednesday’s announcement that the higher-than-expected tariff rates could lead to higher prices and slower economic growth, some suggested that the April 9 deadline leaves time for negotiations.
Chris Zaccarelli, chief investment officer at Northlight Asset Management, said in a note, “The silver lining for investors could be that this is only a starting point for negotiations with other countries and ultimately tariff rates will come down across the board — but for now traders are shooting first and asking questions later.”
Discussion Questions
What do you see as the ultimate fallout of the Trump administration’s tariff plan?
What obvious and less obvious mitigation strategies do retailers have?
Poll
Loading …BrainTrust
Dick Seesel
Principal, Retailing In Focus LLC
Gene Detroyer
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
Gary Sankary
Retail Industry Strategy, Esri
Recent Discussions
More Discussions
How Can Retailers Crack the Gen Z ‘Riddle’?
Gen Z is becoming an increasingly important consumer demographic, but an elusive one to map. How…Does Bath & Body Works’ Scented Holiday Campaign Pass the Sniff Test?
Bath & Body Works is kicking off a new campaign with scent being at the fore…Which Tech Will Solve In-Store Inventory Woes?
Three major tech lineups are looking to solve retail inventory problems. Which is most suited?
Bad enough.
They are bad in scope and in scale. There is now no escape from tariffs. Retailers and brands will cope, but costs will rise and businesses will have to be retooled. This is disruption we don’t need.
A majority of the public, including the retail industry, is unaware of the long-term benefits of tariffs for the American retail industry.
Our society and marketplace are governed by a short attention span theatre. As a result, people often tend to overlook the broader economic benefits that tariffs can provide, such as the protection of domestic industries, the encouragement of local production, and the promotion of long-term economic stability.
Additionally, Trump is not effectively messaging the strategy, benefits, and time frame. Certainly, that is challenging when the deep state and mainstream media do not wish to see Trump’s plans succeed.
Although tariffs do not have to be negative, if the public, media, and retail industry perceive them as negative, retail will have difficulty adjusting.
Cmon
Yeah those pinkos over at the WSJ’s editorial page.
I suspect you are looking at an op ed. Here’s the Editorial Board opinion. https://www.wsj.com/opinion/donald-trump-tariffs-disturbance-markets-trade-243b36ef “Mr. Trump is acting with little understanding about the damage his tariffs will cause.”
Yes, the one to which the most forwarded comment is: ‘Tariffs are taxes and taxes are anti-growth. What has happened to the Republican Party?”
Best late night line “…at least now we know there is no Dark State, because if there was they would of stepped in Weds to grab the car wheel.”
A bizarre comment. There are no long-term benefits to tariffs, and 250 years of history prove it.
The world is reordering its commercial and political alliances. The U.S. will never recover from the change. We are handing the world to China and possibly the EU.
One only needs to look at the damage that tariffs did in 1930 to understand what a mistake this was. It’s mob tactics. Punish everyone, then see who kisses the ring to decide where to ease up on the extortion fee
A simple perception problem? If only this whole scenario had been messaged differently? The financial markets are all a bunch of knuckleheads for interpreting this as having downside?
Hmmm…you give Fox News way too much credit my friend. Call it the inefficiency of government in general. One news channel didn’t create the weakness and malaise that exists. It is no surprise that Congress and even State governments are not thought of in the same positive light as they were 20 years ago.
The country has dry rot. I did not know. It’s obvious now.
And Citizens United, which essentially rendered voters powerless.
As I said in my separate comment, the resurgence of domestic production in many categories sold by retailers is a pipe dream, much more so than in Smoot-Hawley days. (And how did that work out?) Like it or not, the decades-long globalization of supply chain and sourcing is not so easily erased with the stroke of a Sharpie. It’s hard to blame the so-called “deep state and mainstream media” for having a basic understanding of economic history.
I need emoji’s here. Long, thunderous applause…!!!
What Jeff said!
I think they are VERY aware and for those who aren’t paying attention today….in a few weeks they will be.
“promotion of long-term economic stability.” ??? What global retailer said this? What press release quotes Target as wanting any of this ego tariff war?
It’s not just imported goods that will be affected. Domestic manufacturers will take this opportunity to raise their prices as well. Voters who thought they were voting for less expensive eggs will find that they’re paying more for just about everything. We who used to be the leader of the free world are no longer.
Literally the first month of Econ 101 as a freshman in college.
You’re kidding, right? Even by the NRFs rosie prediction, sales increases will not keep up with existing inflation, what to speak of where it’s going.
The uncertainty is crazy making. I’m crawling out of my bunker to survey 100 retailers of all sizes and verticals about how they’re dealing with this CF. It may be my swan song, but on the other hand, $200k has left my investment accounts in 2 weeks so I may have to keep working.
and I’m not poor. Imagine the average Walmart shopper.. We shouldn’t really talk about this. It makes my blood pressure rise. And it won’t lead anywhere good.
For the moment, in grocery food supply, there are ample domestic companies with available alternatives from France, Italy, Spain, UK, Asia – wine, cheese, pasta, noodles. Produce will see higher retail prices this fall and winter when the USA counts on seasonal growers from Central and South America. Domestic growers should face pressure to keep up with greater demand and meeting short-term supply until they can scale up for 2026.
In retail, clothing is immediately impacted as most of it is made overseas. Americans can try to find more Made in the USA, but the industry will lag behind shifts in this sector even for the medium term. American shoppers will need to prepare to spend more on clothes until trade deals are made with greater Asia.
The last USA dept store to have a Notions Dept? (Google AI suggests it was May Company or Lord&Taylor). And Jo-Ann Fabrics about to close all stores.
Govt in USA no longer makes any sense at all. Shutting doors to immigration/workers… means the talent could not even get to the USA to teach and train. (if any country even sees USA as an ally or trustworthy),.
In Florida, our governor has decided we should send 14 year olds out into the fields to pick the crops. His actual words…I had an after school job when I was that age. When he was that age, they were giving out participation trophies to losers. Who’s kidding who?
The tariffs show little comprehension of free market economies in general — and retail specifically. Of course, the exact impact is yet to be seen. There is little reason to expect, though, that the impact can even be only minimally negative. Retailers will have to be brave and savvy while walking fine lines attempting to maintain healthy companies. One issue is also key. While it is clear that ultimately “consumers” bear the burden, tariffs eat into margins unless companies charge tariff costs plus markups. There may end up being a compounding effect. And only time will tell for certain.
I would not be surprised if we see retailers follow VW’s example of listing a “tariff surcharge” on pricing to make the impact clear to consumers. Similar to what is happening in Canadian retailers with American products on the shelf being labeled with a tariff moniker.
Excellent point and excellent idea. Otherwise retailers are blamed by consumers for what is outside their control.
One step further: how could this be a unified Retail Pricing Strategy in USA? What industry coalition has the firepower to make this real? Obviously the FTC (DT’s friends, if the agency exists) would be last to help & could block.
Suggested Retail Price + additional line item CALL OUT, e.g.
“April 2025 President Trump tariff tax: $xx.xx” or
“April 2025 President Trump tariff tax is x% of this price”
If USA democracy is to make any headway in 2025-2027 special elections + the run to 2028… Clarity is 100% needed. Responsibility must be assigned. I’ll help this fight, but don’t know where to start other than the state level.
There was an opportunity here for a masterclass in renegotiating tariffs that could have incentivized new behaviors and trade practices. Instead we have chaos. Two months ago we had a pretty healthy economy and now we could be barreling straight into a recession. The masterclass would have taken 2-3 years of painfully slow negotiation, but if there really are incredibly unfair scenarios existing today and if we really have the leverage we think we do, a new trade paradigm would have been possible. Instead we have alienated every country on the planet with the exception of Russia and North Korea. That’s just weird…really, really weird. Our closest and biggest trading partners in this hemisphere are seething. And pretty soon, car, apparel, and footwear customers will be seething. Oh, and phone customers and computer customers, and……..
Retailers don’t have a lot of healthy options here. Actually, I can’t think of one. They have all new demand calculations to make based on higher retails. Then come the cancellations and smaller orders. Then come the factory problems. And they will have to do this in an environment of total uncertainty about if and when there will be revisions or recissions or carve-outs or…?? It’s hard to come to a conclusion other than chaos was the whole point. Why?
At this point I think recession is all but inevitable. Is the d-word I’m worried about now.
Putting aside the ongoing uncertainty this creates (and that’s bad enough for every retail business as it is), if these tariffs remain and they spark a global trade war (which is likely), the only outcomes are bad ones, unfortunately. Bad for business, bad for retail, and bad for consumers. In some categories it may not be as noticeable in the short-term due to inventory build-ups in anticipation of this reckless action or in certain grocery products that are currently in-season domestically, but looking out into this year it’s definitely cause for concern.
Can these challenges be overcome in the long-term? Possibly, in a few categories, but the fact is that this broad action completely disregards the realities of modern supply chains and manufacturing in the global economy of the 21st century. While it may be nice to reminisce about the “old days” of manufacturing from 80 years ago, waving the tariff magic wand wil not broadly bring manufacturing back domestically. We already see news from Stellantis about layoffs in midwest factories due to the announced tariffs affecting car production. There is too much invested globally and costs would be too high to produce equivalent products domestically in their entirety that consumers would be willing to pay for in most categories. Could some manufacturing return in 5 years time? Possibly, but would the pain inflicted on consumers and workers in the interim be worth it? Not likely. Ultimately, this action is unnecessary chaos and economic destruction with no real goal in sight.
Notably, the country with the biggest trade surplus as a percentage of GDP has experienced a similar decline in manufacturing jobs as the U.S. Maybe it isn’t trade with China that has “hurt” U.S. manufacturing.
BTW, Germany has the biggest trade surplus as a percentage of GDP.
Having now seen the reports on the alleged “formula” used to calculate these new tariffs, it seems even more clear that there was a complete lack of understanding of how the global economy and global supply chains function in the 21st century. This action is applying a centuries old approach to a modern problem. History already shows us it does not work, why should today be any different?
It was capricous at best. Tariffs on coffee and bananas, things we don’t even grow? I’m reminded of the Madness of King George who taxed the colonies to pay for his wars. This trade war seems to cripple the stock market so more billionaires can rush in buy on the low and profit. Prove me wrong when tariffs are rolled back at some point.
Bob, you make a point that hasn’t been made nearly strong enough. Devalued assets are easy pickings for billionaires who can weather the storm, making the concentration of wealth larger, with the additional impact being lower taxes for those purchasing. I usually pretty good at finding silver linings, but I’m struggling on this one.
I feel so sad the the communities that will be devastated by these tariff driven layoffs. One just needs to look at the detritus of Detroit to see what many communities built around heavily impacted industries will look like over the coming years.
I see it as a devastated community of 340 Million (est USA population).
45 months (though I really hope for less) of dictatorship of a criminal madman. (Mad in more than 1 sense). Affecting all, but the job loss ripples will be ongoing.
USA Congress has completely harmed us. But in a full dictatorship, the Congress is disbanded; no longer. GOP has already ceded power to dt … making themselves irrelevant (and being blind to that very fact).
“For decades, our country has been looted, pillaged, raped and plundered by nations near and far, both friend and foe alike.” Trump has been saying this since the late ’80s. One would think he never learned anything about trade while at Wharton. I am sure he could not explain Comparative Advantage and Relative Advantage, concepts that have been proven over the last 250 years.
I am curious. If a country lowers its tariffs on U.S. goods to ZERO, will Trump reciprocate?
China has no tariffs for 49 developing countries and is negotiating tariff reductions with Japan, South Korea, and the EU. China also leads a network of free trade agreements with various countries and regions, including the Regional Comprehensive Economic Partnership (RCEP), as well as agreements with Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam, as well as Australia and New Zealand. The China-ASEAN FTA,. China has applied for membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which is the TPP minus the U.S.
The consequences for the U.S. will be permanent. While a new, more enlightened administration may turn things around domestically, the international implications will be permanent and not good.
Good point highlighting the international consequences. This action is yielding economic authority to other powers, like China, who wil no doubt take advantage of the moment created and use it to strengthen their ties with other countries we used to refer to as “allies” before imposing these broad tariffs with no real goal in sight.
I exchanged emails yesterday with a friend who is also CEO of a shoe manufacturing business. He and others in his industry anticipated tariffs but not to the degree of what was announced on Wednesday. While he has diversified his sourcing and manufacturing from China to other countries like India (oops!), he sees no realistic movement of manufacturing back to this country. The supply chain and infrastructure no longer exist, and the low-skilled workforce making shoes also no longer exists.
So…the reality is that the higher prices paid by importers (and passed along to retailers and consumers) will not be offset by a resurgence in domestic production anytime soon. The capital investment takes too long and costs too much, given that the next president may erase what Trump has wrought with another stroke of the pen.
I personally would say “high” skill. “the low-skilled workforce making shoes”. The lower skill is marketing the already in existence.
Re: “The capital investment takes too long and costs too much”. Based on stock market + new ultra low global standing of the USA… who exactly is rushing into invest in USA? News flash for national security (which is already wrecked)… the biggest/fastest/newest investors for the USA will be from outside the USA. The age old question… are those investors profits funneled back into USA (or basically sent back to the investor’s country).
Why legislative trade agreements are best… documents negotiated at intervals. With all angles represented… manufacturing, economist, legal, et al.
Fundamentally the overall lack of smart ethical people (I’d settle for average intelligence frankly) in leadership positions at every level of government is a fundamental and shocking root cause here. With our money laden electoral process and the blood sport of denigrating your opponents who wants to be a politician. Here in Oregon we are waking up to multiple unexpected budget deficits of $100m across several departments. Can you imagine a retail CFO coming into a board meeting and going “whoops we lost track of things and just found 2 to 3 departments who have overspent their budgets each to the tune of $100’s of millions. and the answer – raise taxes to cover. Whether it’s trade policy, the next (probably self-inflicted) medical crisis, or the shocking new immigration policies of “disappear people who don’t look like us” we’re in for a really bad stretch. I think when Edward Gibbons great great great grandchild write about the rise and fall of the American empire this month will be the pivotal point. Whether it’s a bump in the road or the long dive to the bottom remains to be seen.
While I agree with you, let’s be honest. If Biden’s team hadn’t realized they’d lost the public’s trust—letting him go on stage and appear frail next to Trump—then waited months to convince him not to run until George Clooney’s New York Times Op-Ed pointed out what many had seen for years, and finally pushed through Harris without even holding a primary race…the anger at government would not have won the election. Now we are all living in a world with someone acting as King. It is unconscionable.
Hey Bob
and I agree with you. Wasn’t limiting my description of politicians as lacking intelligence and ethics to one party or the other. Let’s face it there are dumb people on both sides.
Agree. The DOJ has my vote for 1 of the original weakest links.
Totally
A trade war will severely disrupt the US retail market, and it will destabilize the global economy. For retailers… lower-income folks are going to get it hard at a time when they’re already struggling. With the elimination of safety nets, the bottom economic strata are in real trouble. Trump has said new tariffs on pharmaceuticals are going to really hurt older Americans. The middle class are watching their 401ks, which grew very nicely during the last 12 years, getting wiped out by these economic policies and are going to pull back substantially on spending. Retailers, especially those in discectionary categories, are in real trouble. Travel, hospitality, not a rosy future. This is ugly and getting worse as we spiral into a full on tit for tat trade war.
The added layers of this trade war… irrational thinking, huge ego and volatile anger. ps- add in global combat/war
Allegedly these tariffs are to promote U.S. made products, yet it will take a decade for the U.S. to ramp up sufficient manufacturing infrastructure to even begin to meet consumer demand. And even then raw materials will still be needed from global partners — partners we are rapidly burning bridges with. In the interim it’s the consumers who will bear the pain of high prices as a result of these tariffs. And as consumers understandably pull back and alter their spending, many brands and retailers will suffer, or close as collateral damage. It’s such a shame. The U.S. has long been in need of bringing back some of its own manufacturing, especially in clothing. An organized long term plan executed in concert with our global partners would have only strengthened our economy and our relationships with allies. Instead it’s a crash and burn.
“to promote” is the myth.
Consumers paying extra $ on goods has no direct correlation — to Boards/stockholders decision when/where/how to invest $$$$ in factories, real estate, transport, labor, etc.
Corporations voted on the greed of lower corp taxes. Voting for GOP had zero to do with consumers. Gov’t/public/private funding for TRADES to be once again taught as pipeline into revived industry would be the start. (along with immigration & visa policy to allow in the teaching talent the USA needs to learn from)
While shock and fear are dominant right now, they’re also jolting global companies and consumers into action. U.S. tariffs have already emboldened trading partners like Canada and the EU to seek new trade alliances and strive to be more self-supporting. In the meantime, real people are at risk. How many small businesses and people living paycheck to paycheck will be able to withstand this economic pressure?
In terms of fallout, it seems two big negative effects are already having an impact, 1) Tariffs themselves driving increased costs, though likely less than the doomsday projections as it’s likely that producers, wholesalers, and retailers are likely to eat some portion of the impact, reducing the impact to consumers. 2) The uncertainty caused by the current implementation approach of threatening, delaying, applying, reducing, delaying, applying, removing, delaying, etc. creates a chilling effect on consumer spending and inventory investments, rippling through the supply chain. A critical long-term impact will be the destruction of current supply chain relationships – at country and business levels – with foreign manufacturers likely replacing US clients with non-US clients, an effect that will last decades.
The obvious mitigation strategy is mentioned above, each party in the supply chain absorbs part of the pain. As for the less obvious, it will be interesting to see how people adjust, innovate, succeed, and fail.
Companies impacted by increased cost of manufacturing certainly cannot “absorb” what has been documented by the White House. No amount of mitigation can overcome a landing cost of 20% or higher for athletic shoes, footwear, apparel and more from Southeast Asia – untenable. As stated, this is a time of significant change and will take several years to sort this out – assuming what has been published remains in place by date of go live. Delivering greater “value” to customers who in the end as consumers will be forced to pay the “freight” as well as manufacturers of auto, white goods and other mechanical goods/devices is a challenge. The % increase cannot be overcome with improved service solution, rewards, benefits, etc. Incentives to buy now vs. later and avoid the increases seems reasonable. One personal story, yesterday my Volvo dealership was packed with owners bringing their cars in for service to avoid an escalated price on parts. Savvy shoppers know the value of money and what it gets you – tariffs creates a whole new ballgame. Going to be a bumpy ride!
This might have been the remedy in the past: “Retailers are expected to pressure foreign suppliers to absorb some of the costs”
But there is no nuance or leverage, if everyone everywhere is asking the same of suppliers. Far from a favor/good faith… both sides go into survival mode, at same time. I would expect a lot more change in assortments and buying strategy… paring back of similar items, core of basics, and more care on the trends.
Interesting discussion with remarkably little about how retailer will respond aside from Fear, Uncertainty, and Doubt (FUD) at best. The very least is 100% compliance on PO detailing to source, material, and liability. Broader is a reassessment of portfolio with low volume/high price sensitivity being dropped from procurement cycles… the mother of all SKU reductions if you wish. Trade spend and promotion evaluation follows with leveraging ‘promotions’ to hide overall price increases. Banner consolidation, exit from markets, and labor reduction all come unpleasantly to mind.
The very unpleasant but real opportunity is that shoppers will rapidly lose a ‘cognitive price map’ to make balanced value-driven solutions… they plain won’t know what the price is supposed to be since the foundation of past experience is no longer valid. So many retailers will do what retail does with a less knowledgeable shopper… get margin where they can in the gray fog.