Retail companies continue to become casualties of the ongoing trade war between the United States and China, and some of the biggest players in the industry are warning that consumers will be the next victims.
Walmart, the world's largest retailer, recently sounded the alarms in predicting that U.S. shoppers will be forced to contend with higher prices if more tariffs are imposed on imports from China, echoing previous comments made by department store chain Macy's.
"We have mitigation strategies that have been in place for months," Walmart CFO Brett Biggs told Wall Street analysts during a recent earnings call. "But increased tariffs will increase prices for customers."
Macy's CEO Jeff Gennette expressed similar sentiments on a first-quarter earnings call, ominously referring to a proposed fourth tranche of tariffs placed on $300 billion worth of imported Chinese goods as "the big one," and admitting that such an increase "was not contemplated when we provided annual [earnings] guidance."
Furniture was already affected by the third round of tariffs, but the potential fourth tranche would impact home goods, shoes, clothing and accessories, cutting closer to the heart of Macy's product portfolio.
"Looking at all those categories and those brands that are included, it is hard to do the math to find a path that gets you to a place where you don't have a customer impact," said Gennette.
Macy's potentially can exercise more control over critical decisions, notes Supply Chain Dive, since approximately 20% of the company's affected products are private label brands. The American department store chain has for years been attempting to move production of these goods out of China, but according to Gennette, the People's Republic is "still an important piece of our overall mix." Macy's has also been consolidating business in an effort to reduce the number of manufacturers it must work with, giving the company greater negotiating power, which smaller retailers likely lack.
In fact, although large chains like Walmart and Macy's have the biggest platforms for decrying these tariffs, it is the smaller retailers that will have less capacity for supply chain adjustments.
"Tariffs can mean lower wages, fewer employees, deferred investments and higher prices for consumers," the National Retail Federation complained in a statement earlier this month. "Small businesses are particularly vulnerable, since they don't have the resources and flexibility to quickly switch suppliers."