RH "expects no impact to Fiscal 2019 or Fiscal 2020 financial results from the tariffs imposed on current and new product categories imported from China effective September 1st, 2019, October 1st, 2019 and December 15th, 2019," the luxury furniture company said in an Aug. 29 news release. "The Company expects the impact from the increased tariffs will be offset by vendor price reductions and minor price increases," it said.
Two letters, one from American for Free Trade, and one from Footwear Distributors & Retailers of America, tell President Donald Trump that tariffs will be passed along to consumers, and ask him to change his mind. On Sept. 1, about $112 billion in goods from China will face an additional 15 percent tariff, and another $160 billion in imports will get the same increase on Dec. 15. Trump also said 25 percent tariffs on $200 billion worth of goods from China will go to 30 percent on Oct. 1, but no Federal Register notice has made that official yet.
Target remains “mindful of the volatility and uncertainty in the marketplace, including the timing and extent of additional China tariffs,” CEO Brian Cornell said on a Q2 earnings call Aug. 21. Noting that List 4 Section 301 tariffs at 10 percent are set to hit Sept. 1 on apparel, TVs, toys and home goods, Cornell said Target is following developments carefully: “We’re encouraged that many items originally slated for tariff increases in September have now been delayed until later in the year,” he said of the List 4B tariffs deferred until Dec. 15. As long as the trade situation with China “remains fluid,” he said, “it will present an additional layer of uncertainty and complexity as we plan our business.”
TV imports to the U.S. turned sharply more China-centric in the weeks after the Trump administration announced its proposed List 4 Section 301 tariffs on finished sets from China among the roughly $300 billion worth of goods not previously dutied, an analysis of Census Bureau trade statistics found. Observers will debate whether importers’ rush to beat the threatened tariffs played a role in the steep influx of China-sourced TVs arriving in the U.S. during June.
Though Walmart expects to finish 2019 toward the “upper end” of its previous guidance of between 2.5 percent and 3 percent same-store sales growth, it’s slightly scaling back full-year expectations on consolidated net sales growth, it said in a fiscal Q2 report Aug. 15. It was the first bellwether of possible retail impact from the 10 percent List 4 Section 301 tariffs taking effect Sept. 1, and again Dec. 15, on Chinese goods.
Goldman Sachs told clients that the U.S. trade war with China could lead firms to invest, hire or produce less, according to reports about the note, sent Aug. 11. Economists at the firm now estimate the tariffs will create a 0.6% drag on the economy, up from an earlier prediction of 0.2%, and are forecasting fourth-quarter GDP growth of 1.8%, down 20 basis points. They also expect the List 4 tariffs to go forward as announced, starting on Sept. 1.
The final list of goods subject to the latest round of Section 301 tariffs will likely be out in days, and duties will probably remain in place for the foreseeable future, given the current state of U.S.-China trade negotiations, trade consultant David Trumbull of Agathon Associates said in an Aug. 8 post on his blog Textiles and Trade. “In view of short time before the tariffs are anticipated and the fact that [the Office of the U.S. Trade Representative] has already gathered public comments and testimony and started analysis, that USTR will likely issue the final list 4 within a few days,” he said. “Based on our observations from lists 1 through 3, we believe it unlikely that USTR will remove much from list 4. We also believe that, given the current state of U.S.-China trade talks, which are at the coldest ever, there is little likelihood of averting tariffs, meaning the September 1, 2019, [start] will likely stick. Finally, in view of the way List 3 went from 10% to 25%, we believe that if this trade dispute continues into 2020, there is substantial risk of 25% tariff of list 4,” Trumbull said.
The escalating trade rhetoric between the U.S. and China should make all companies “realize (if you have not already) that this is not a temporary dispute and is not likely to be resolved anytime soon,” customs lawyer Ted Murphy with Baker & McKenzie blogged on Aug. 9. “The two sides are doubling down and digging in.” With 2020 elections “inching closer” and China’s 70th birthday of the People's Republic festivities set for October, “the political considerations associated with these events make it less likely that a deal will be reached,” he said. “As a result, companies should be re-examining/re-adjusting their supply chains and pursuing additional Section 301 mitigation strategies,” while taking “a view to the medium/long term,” Murphy said.
Generalized System of Preferences program duty savings in June fell by about 18 percent compared with June last year, to $66 million, the Coalition for GSP said in a blog post. That decline seems to reflect the first full month without Turkey's eligibility in the program (see 1905170075) and slightly less than a month without India's eligibility (see 1906050043). "The $15 million year-over-year drop was the largest decline in GSP savings since the 2008-2009 financial crisis," the group said. While the savings from other countries grew by about 23 percent, or $12.5 million, that wasn't enough to offset the losses of India and Turkey, the group said. Using state-specific data, in many cases the "declines were wholly attributable to lost GSP for India and Turkey, leaving little chance that savings will bounce back in July," it said.
Although there have been no signs of retail weakness and virtually no signs of inflation from the U.S.-China trade war so far, the National Retail Federation's David French said, "Tariffs thus far have only been on the margin of the consumer economy. What has happened to date has not been indicative of the future." Joann Fabrics and Crafts stores have been on the leading edge of consumer effects, its CEO told reporters Aug. 7 on a conference call organized by the NRF. He said almost half of what they import from China was on List 3, and therefore has a 25 percent tariff.