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."