November 8, 2024
Photo by Library of Congress on Unsplash
Will Trump’s Planned Tariffs Actually Work as Intended?
With former President Donald Trump having been named president-elect after the results of the Nov. 5 election, questions surrounding the enactment of his stated policy positions — most notably, tariffs — have been making headlines of late.
Trump has stated his intention to enact significant tariffs of between 10% and 20% on all imports, as well as tariffs of between 60% and 100% on goods from China. He doubled down on this policy during the most recent presidential debate in September, as CNBC detailed.
Steve Madden Signals Major Reduction in Goods Sourced From China
One major retailer has already made plans to reduce its sourcing from China in favor of moving factories to other nations as a result of Trump’s tariff policy.
Steve Madden — most famous for its designer shoes and boots — has signaled a significant exit from manufacturing its products in China. On a Nov. 7 earnings call, CEO Edward Rosenfeld stated the company had been preparing for the eventuality that manufacturing may have to move out of China in an expedited manner. Moving manufacturing to factories in Cambodia, Vietnam, Mexico, and Brazil was mentioned as an alternative, according to a separate CNBC report.
“As of yesterday morning, we are putting that plan into motion,” he said on Thursday. “And you should expect to see the percentage of goods that we sourced from China to begin to come down more rapidly going forward.”
Rosenfeld further stated that about two-thirds of Steve Madden’s business relied upon U.S. imports, and that approximately 70% of those goods originated from China. He continued to say that the company’s goal is to reduce that percentage by between 40% and 45% over the next year.
Other Retailers (and Retail Organizations) Weigh In
While moving operations outside of China may be a concrete reality for those retailers heavily invested in goods manufactured there, other businesses with less exposure don’t seem to be as concerned about the possibility of a tariff hike.
Tapestry, the parent company responsible for the Coach and Kate Spade labels, also held a Nov. 7 earnings call. On that call, CFO Scott Roe suggested that the company was already well-positioned, nimble, and ready to weather any change in tariff policy that Trump might issue.
“My goodness, we’ve had so many disruptions and challenges that have forced us to make adaptions based on port strikes and freight lanes, whatever it might be, tariff regimes changing over time,” Roe said, per CNBC. “So we’re pretty well versed in managing through this.” Currently, under 10% of Tapestry’s total sourcing currently comes from China.
The National Retail Federation (NRF) was more critical of Trump’s tariff proposals, however. The NRF suggested that Americans would lose between $46 billion and $78 billion in annual consumer spending power as a result of the proposed tariff increase, then pivoted to provide a categorical breakdown of estimated cost increases based on recent study data.
“Consumers would pay $13.9 billion to $24 billion more for apparel; $8.8 billion to $14.2 billion more for toys; $8.5 billion to $13.1 billion more for furniture; $6.4 billion to $10.9 billion more for household appliances; $6.4 billion to $10.7 billion more for footwear, and $2.2 billion to $3.9 billion more for travel goods,” the NRF explained.
Analysts Debate the Merits of Trump’s Tariffs
Analysts on both sides of the tariff issue have been vocal in their support, or objection, to Trump’s tariff proposals.
According to research from The Peterson Institute of International Economics, should Trump’s more expansive tariffs go into effect, the typical American household could be on the hook for an additional $2,600 per year. Douglas Holtz-Eakin, president of the American Action Forum, said Trump’s trade proposals could be “equivalent to a $3 trillion tax hike,” as reported by CNN.
However, critics of this analysis say that it assumes much — including that the entire cost of the tariff is passed along to consumers, or that domestic producers will raise prices by the entire amount of the imposed tariff — according to USA Today.
Brian Marks, executive director of the Entrepreneurship and Innovation Program at the University of New Haven in Connecticut, was skeptical of the accuracy of the above models. “Using that strong assumption, that would be an overestimation of the direct impact on consumers,” Marks said.
USA Today also quoted Kent Smetters, a University of Pennsylvania Wharton School professor and faculty director of the Penn Wharton Budget Model. Smetters indicated that while tariffs would ultimately “add to the price [of goods]… just not as much as some people are saying,” consumers may also “turn to American-made substitutions, which many economists haven’t considered.”
Former Treasury Secretary Says Trump Will Be ‘Careful’ Concerning Tariffs
Speaking to CNN’s Jake Tapper on Nov. 7, Steven Mnuchin — who served as Treasury Secretary during the span of Trump’s initial four-year term — indicated that the president-elect would be measured in his enactment of the planned tariffs.
“I think President Trump clearly understands the impact of inflation, and I think he’s going to be very careful,” Mnuchin said, according to CNN.
Mnuchin added that during Trump’s first term, tariffs received exceptions on “things that were going to have an impact on U.S. companies. But we did it very strategically.”
BrainTrust
David Slavick
Co-Founder & Partner, Ascendant Loyalty
Kai Clarke
CEO, President- American Retail Consultants
Scott Benedict
Founder & CEO, Benedict Enterprises LLC
Recent Discussions
Discussion Questions
Do you believe that Trump will actually enact his stated tariff policies, and if so, to what extent?
Do you think retailers will be able to gain concessions from the Trump administration regarding tariffs through lobbying or other pressures?
Will the American consumer endorse the tariffs when (or if) they are enacted, or is there a likelihood of public pushback?
Poll
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If the intention of the tariffs is to import less from China and other nations, then, yes, I am sure they will work in part. The question, though, is at what cost. Tariffs will push up costs for those importing goods – whether retailers or manufacturers – and that in turn will drive up prices as companies seek to recoup some of this additional expense. All that said, President Trump tends to speak tough as a negotiating tactic and ultimately settles on a solution that’s less harsh. This happened with tariffs in his first term. But, regardless, there will be negative externalities here.
Manufacturers are already moving to Vietnam and other states. What’s the point, other than disrupting our economy?
I believe there are many conceptual reasons that influence the potential tariff policy (e.g. less total foreign investment would destabilize an already fragile China economy, reduced risk of US economic disruption should a deeper US-China conflict arise, by directly causing redistribution of US import dependency, there is a real opportunity to create strong alliances with other markets and industrial segments) but you are 100% spot on – the reasons (and risks) for these tariffs need to be better explained.
You understand that China is no longer dependent on us, right? We are dependent on THEM.
If the president-elect enacts these bold proposed tariffs, it could spur domestic sourcing and nearshoring.
However, many consumers already feel defeated by inflation. Tariffs would further increase the cost of living if domestic alternatives are expensive or unavailable.
Retailers like dollar store chains and trading partners around the world would also push back against these tariff policies.
I think the answer is clear — no, they won’t. Tariff’s are not a path to long term (or even short-term) economic health. Of course, the question really is whether Trump will follow up on what he said in the campaign. History shows it is unlikely. That, of course, makes the future essentially unpredictable. We will simply have to see what happens.
Point nuimber one: he isn’t actually the President elect yet (no, I’m not some Denialist, but am aware that the Electoral College doesn’t meet until December)
Back on track: I don’t think they’ll be either productive or disruptive, since I doubt they’ll actually get much past the bluster stage. From personal experience , I can testify they’re many things, a nuisance (to deal with and rife with the possiblity of corruption) being the main one(s).
While I once shared that optimism, there are no checks this time around. My father used to say “when people tell you who they are, believe them”
Trump’s proposed tariffs are simply an inflationary tax put on consumers. No matter how you consider this, as manufacturers face higher costs, they have to raise their selling prices to reflect these increased costs, which means more of a tax burden by the consumer, and an increase in pricing; which is inflationary. The offending countries don’t “pay” for this, only the ending consumer who has to burden the increased prices of the goods and services they want. If you want to stop the imports from a country, then just use a simple quota, or limit products and quantities from a country. The effect is straightforward, fast and direct.
These policies, as proposed, will have a devastating impact on a recovering economy. Tariffs are tools in trade policy that need to be utilized carefully, thoughtfully, and strategically with the skill of a surgeon. Trump’s approach is more akin to a serial killer with a chainsaw.
Diversifying supply chains and reducing reliance on China is a key lesson that needs to be learned from the COVID-19 pandemic. Reshoring and diversifying supply chains need to be done carefully over time with incentives for the business community, particularly those of us in retailing, to move thoughtfully to a less China-centric supply chain.
In addition, pulling out of China too quickly eliminates our geopolitical influence on them as we lose all leverage on them in light of their military and human rights opportunities. I hope that NRF and leaders from across retail will seek to influence Trump to take a measured approach.
Trade wars in general are not good. However, when you combine this with the Trump administrations stated intent to have a weaker dollar (thus ginning up sales for American exports) I believe this move (if enacted) will provide a short term benefit for American Manufacturing.
If you combine tariffs with lower taxes and (one can only hope) a much simpler tax code you will see a massive unleashing of the economic “animal spirit” that exists in our country. I put very low odds on that one, sadly.
Tariffs satisfy both the carrot and the stick approach. It puts your trade partners on notice that supply and demand is a two-way street. When foreign entities create manufacturing in the U.S. this is part of the equation. Relying on production from Made in the U.S.A. certainly benefits raw materials plus employment dynamics. Saying it and doing it, and to what “degree” or intensity and where the tariffs are applied will determine what the short term vs. long term effect on the U.S. as well as global economy will be – negative short term, positive longer term is my guess. The impact on business planning, analysis and marketing strategies will be significant and dynamic. Get ready for a wild ride!
They may have a significant negative impact on inflation. Tariffs, as a rule, are imposed to protect a national industry. Trump would impose them as retaliatory punishment. The problem arises because our cost of labor is so much higher than in countries from which import that, unless we can lower our production costs below those countries from which we import, we are not protecting a domestic industry and, the only thing that tariffs would accomplish is to raise prices and fuel inflation. He doesn’t get it.
It is unfortunate that all issues, including tariffs, are debated with an emotionally biased partisan tone. Objectiveness is my goal here.
A majority of economists believe tariffs are counterproductive and will cause inflation. However, President Trump is fully committed to reducing inflation, which indicates he believes tariffs will have only positive effects.
Looking at it from 30,000 feet, with all objectivity, I believe he may be right in the long run.
The short term impact will be that foreign goods will cost more, and Americans will gradually purchase American goods instead. While consumers will be inconvenienced, especially when it comes to appliances and cars, in the long run this will result in a strong, more stable American economy.
Foreign companies that make products in the United States will not be subject to tariffs, according to Trump. Many companies already do this, and more will do so in the future. Our economy and jobs are also benefited by that.
Meanwhile, I am wondering about appliances because most companies are Asian. Foreign cars are purchased by Americans as much as domestic cars. However, American factories are used by companies such as Toyota (and Lexus). American auto companies will almost certainly be discouraged from relocating to Mexico because of the tariff plan.
Even many American products are made with components and parts from China, Japan, Korea, Vietnam, and other countries. I’m sure that issue has been considered.
Tariffs may replace income taxes to a large extent, according to some economists. It’s a win-win situation. Tariffs have been suggested as a way to pay our national debt. I think that would be amazing as well.
So, overall, in summary, I think the tariff plan will have significant growing pains, but in the long run, it might solve many problems.
David, I have to start by saying that your take on this issue feels more partisan than objective, which of course is your prerogative. It’s hard to know whether President-elect Trump is taking an extreme position on tariffs as an opening gambit on trade negotiations, or whether he really means to impose exorbitant tariffs on Chinese goods in particular. Given his stated relationship with Xi, we can hope it’s the former instead of the latter.
While some companies (like Steve Madden, for example) might be nimble enough to pull their sourcing from China, others are not. (As you point out, it’s not so easy for appliance manufacturers to pull up stakes from long-established sources of supply.) If history is any guide, and if Trump follows through on his threats, the effects on the economy will not be positive — in part because tariffs will be paid by U.S. companies and consumers, not the countries of origin. There was plenty of bad information being tossed about on this issue, and consumers (who vote) may not like the real-world consequences.
Dick, thank you for your comments.
Tariffs lead to higher prices for American consumers as companies pass along increased costs, impacting goods like electronics, clothing, and food. This cost increase can drive inflation, reduce purchasing power, and limit consumer choices, as some foreign products become less competitive or unavailable. While tariffs aim to protect domestic industries, they can also lead to job losses in sectors reliant on imports or affected by retaliatory tariffs. Long-term, tariffs may encourage domestic production and investment in certain industries, but this often takes time and may not fully offset immediate consumer costs or economic slowdowns.
Broad use of tariffs to bring pressure on global economic rival is certainly an aggressive approach. For our apparent next president, such tough talk is central to the persona. I’m not a fan of substituting one tax (tariffs) for another (corporate income taxes). It would be inflationary in the short term and I’m skeptical of claims that it will benefit consumers in the longer term. (Remember “trickle down”?)
For some U.S. producers, broad tariffs would hamstring foreign competition and provide further headroom for price increases. Businesses built around imports (including many discount stores) will find their pricing models severely challenged, to the detriment of wage-earning customers.
It would be worth reminding the next POTUS and his political allies that U.S. retailers in aggregate represent our nation’s largest industry and economic force. The rules of the game should not be altered in a cavalier fashion – certainly not to create political theater.
This is a short-term strategy. The last Trump presidency turned the economy white hot, but also ballooned the deficit. This action will probably do the same thing. And, as happened last time, a change in administration will have to come in and fix it.
Tariffs are taxes on consumers, raise prices to change consumption.
Tariffs are inflationary. Trump 2.0 will make Biden inflation look like chump change.
Consumption will go down in the face of increased prices and ultimately will end in recession.
There is a reason most production is off-shore: because it is cheaper. Theoretically production could move here, but it would take decades and prices would not come down
This is essentially what happened with Brexit, and as a result, available inventory in stores went significantly down, and prices went way up. Prices will go up with this approach, and there’s no world in which that cost won’t be passed along to the consumer. Whether it’s all of that cost or some of it depends on the brand, but this means supply goes down and prices go up.
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If the intention of the tariffs is to import less from China and other nations, then, yes, I am sure they will work in part. The question, though, is at what cost. Tariffs will push up costs for those importing goods – whether retailers or manufacturers – and that in turn will drive up prices as companies seek to recoup some of this additional expense. All that said, President Trump tends to speak tough as a negotiating tactic and ultimately settles on a solution that’s less harsh. This happened with tariffs in his first term. But, regardless, there will be negative externalities here.
Manufacturers are already moving to Vietnam and other states. What’s the point, other than disrupting our economy?
I believe there are many conceptual reasons that influence the potential tariff policy (e.g. less total foreign investment would destabilize an already fragile China economy, reduced risk of US economic disruption should a deeper US-China conflict arise, by directly causing redistribution of US import dependency, there is a real opportunity to create strong alliances with other markets and industrial segments) but you are 100% spot on – the reasons (and risks) for these tariffs need to be better explained.
You understand that China is no longer dependent on us, right? We are dependent on THEM.
If the president-elect enacts these bold proposed tariffs, it could spur domestic sourcing and nearshoring.
However, many consumers already feel defeated by inflation. Tariffs would further increase the cost of living if domestic alternatives are expensive or unavailable.
Retailers like dollar store chains and trading partners around the world would also push back against these tariff policies.
I think the answer is clear — no, they won’t. Tariff’s are not a path to long term (or even short-term) economic health. Of course, the question really is whether Trump will follow up on what he said in the campaign. History shows it is unlikely. That, of course, makes the future essentially unpredictable. We will simply have to see what happens.
Point nuimber one: he isn’t actually the President elect yet (no, I’m not some Denialist, but am aware that the Electoral College doesn’t meet until December)
Back on track: I don’t think they’ll be either productive or disruptive, since I doubt they’ll actually get much past the bluster stage. From personal experience , I can testify they’re many things, a nuisance (to deal with and rife with the possiblity of corruption) being the main one(s).
While I once shared that optimism, there are no checks this time around. My father used to say “when people tell you who they are, believe them”
Trump’s proposed tariffs are simply an inflationary tax put on consumers. No matter how you consider this, as manufacturers face higher costs, they have to raise their selling prices to reflect these increased costs, which means more of a tax burden by the consumer, and an increase in pricing; which is inflationary. The offending countries don’t “pay” for this, only the ending consumer who has to burden the increased prices of the goods and services they want. If you want to stop the imports from a country, then just use a simple quota, or limit products and quantities from a country. The effect is straightforward, fast and direct.
These policies, as proposed, will have a devastating impact on a recovering economy. Tariffs are tools in trade policy that need to be utilized carefully, thoughtfully, and strategically with the skill of a surgeon. Trump’s approach is more akin to a serial killer with a chainsaw.
Diversifying supply chains and reducing reliance on China is a key lesson that needs to be learned from the COVID-19 pandemic. Reshoring and diversifying supply chains need to be done carefully over time with incentives for the business community, particularly those of us in retailing, to move thoughtfully to a less China-centric supply chain.
In addition, pulling out of China too quickly eliminates our geopolitical influence on them as we lose all leverage on them in light of their military and human rights opportunities. I hope that NRF and leaders from across retail will seek to influence Trump to take a measured approach.
Trade wars in general are not good. However, when you combine this with the Trump administrations stated intent to have a weaker dollar (thus ginning up sales for American exports) I believe this move (if enacted) will provide a short term benefit for American Manufacturing.
If you combine tariffs with lower taxes and (one can only hope) a much simpler tax code you will see a massive unleashing of the economic “animal spirit” that exists in our country. I put very low odds on that one, sadly.
Tariffs satisfy both the carrot and the stick approach. It puts your trade partners on notice that supply and demand is a two-way street. When foreign entities create manufacturing in the U.S. this is part of the equation. Relying on production from Made in the U.S.A. certainly benefits raw materials plus employment dynamics. Saying it and doing it, and to what “degree” or intensity and where the tariffs are applied will determine what the short term vs. long term effect on the U.S. as well as global economy will be – negative short term, positive longer term is my guess. The impact on business planning, analysis and marketing strategies will be significant and dynamic. Get ready for a wild ride!
They may have a significant negative impact on inflation. Tariffs, as a rule, are imposed to protect a national industry. Trump would impose them as retaliatory punishment. The problem arises because our cost of labor is so much higher than in countries from which import that, unless we can lower our production costs below those countries from which we import, we are not protecting a domestic industry and, the only thing that tariffs would accomplish is to raise prices and fuel inflation. He doesn’t get it.
It is unfortunate that all issues, including tariffs, are debated with an emotionally biased partisan tone. Objectiveness is my goal here.
A majority of economists believe tariffs are counterproductive and will cause inflation. However, President Trump is fully committed to reducing inflation, which indicates he believes tariffs will have only positive effects.
Looking at it from 30,000 feet, with all objectivity, I believe he may be right in the long run.
The short term impact will be that foreign goods will cost more, and Americans will gradually purchase American goods instead. While consumers will be inconvenienced, especially when it comes to appliances and cars, in the long run this will result in a strong, more stable American economy.
Foreign companies that make products in the United States will not be subject to tariffs, according to Trump. Many companies already do this, and more will do so in the future. Our economy and jobs are also benefited by that.
Meanwhile, I am wondering about appliances because most companies are Asian. Foreign cars are purchased by Americans as much as domestic cars. However, American factories are used by companies such as Toyota (and Lexus). American auto companies will almost certainly be discouraged from relocating to Mexico because of the tariff plan.
Even many American products are made with components and parts from China, Japan, Korea, Vietnam, and other countries. I’m sure that issue has been considered.
Tariffs may replace income taxes to a large extent, according to some economists. It’s a win-win situation. Tariffs have been suggested as a way to pay our national debt. I think that would be amazing as well.
So, overall, in summary, I think the tariff plan will have significant growing pains, but in the long run, it might solve many problems.
David, I have to start by saying that your take on this issue feels more partisan than objective, which of course is your prerogative. It’s hard to know whether President-elect Trump is taking an extreme position on tariffs as an opening gambit on trade negotiations, or whether he really means to impose exorbitant tariffs on Chinese goods in particular. Given his stated relationship with Xi, we can hope it’s the former instead of the latter.
While some companies (like Steve Madden, for example) might be nimble enough to pull their sourcing from China, others are not. (As you point out, it’s not so easy for appliance manufacturers to pull up stakes from long-established sources of supply.) If history is any guide, and if Trump follows through on his threats, the effects on the economy will not be positive — in part because tariffs will be paid by U.S. companies and consumers, not the countries of origin. There was plenty of bad information being tossed about on this issue, and consumers (who vote) may not like the real-world consequences.
Dick, thank you for your comments.
Tariffs lead to higher prices for American consumers as companies pass along increased costs, impacting goods like electronics, clothing, and food. This cost increase can drive inflation, reduce purchasing power, and limit consumer choices, as some foreign products become less competitive or unavailable. While tariffs aim to protect domestic industries, they can also lead to job losses in sectors reliant on imports or affected by retaliatory tariffs. Long-term, tariffs may encourage domestic production and investment in certain industries, but this often takes time and may not fully offset immediate consumer costs or economic slowdowns.
Broad use of tariffs to bring pressure on global economic rival is certainly an aggressive approach. For our apparent next president, such tough talk is central to the persona. I’m not a fan of substituting one tax (tariffs) for another (corporate income taxes). It would be inflationary in the short term and I’m skeptical of claims that it will benefit consumers in the longer term. (Remember “trickle down”?)
For some U.S. producers, broad tariffs would hamstring foreign competition and provide further headroom for price increases. Businesses built around imports (including many discount stores) will find their pricing models severely challenged, to the detriment of wage-earning customers.
It would be worth reminding the next POTUS and his political allies that U.S. retailers in aggregate represent our nation’s largest industry and economic force. The rules of the game should not be altered in a cavalier fashion – certainly not to create political theater.
This is a short-term strategy. The last Trump presidency turned the economy white hot, but also ballooned the deficit. This action will probably do the same thing. And, as happened last time, a change in administration will have to come in and fix it.
Tariffs are taxes on consumers, raise prices to change consumption.
Tariffs are inflationary. Trump 2.0 will make Biden inflation look like chump change.
Consumption will go down in the face of increased prices and ultimately will end in recession.
There is a reason most production is off-shore: because it is cheaper. Theoretically production could move here, but it would take decades and prices would not come down
This is essentially what happened with Brexit, and as a result, available inventory in stores went significantly down, and prices went way up. Prices will go up with this approach, and there’s no world in which that cost won’t be passed along to the consumer. Whether it’s all of that cost or some of it depends on the brand, but this means supply goes down and prices go up.