US-China Trade Dispute Could Slam US Retailers

Economy

US-China Trade Dispute Could Slam US Retailers

US President Donald Trump said he was considering additional penalties on US$ 100 billion in Chinese goods. Jonathan Gold, the National Retail Federation's vice president for supply chain and customs policy, expressed concern over what the new set of tariffs might entail. "Our concern is that the new set of tariffs will turn to more consumer products and will now include things like apparel, home goods, shoes, all of those basic retail goods coming in from China," Gold said.

Apparel and footwear, both labour-intensive industries in China, made up a combined US$ 39 billion in US imports.

Said Robert D'Loren, chief executive of Xcel Brands Inc , a clothing supplier to Macy's Inc, Hudson's Bay Co and others, "If tariffs were to be introduced on apparel, the very next day I will be on a plane to China and I will be working with my factories, trim suppliers, mills to have each of us assess how much tighter we can work to deal with this," he said.

Growing production costs in China has already led to many retailers diversifying their sourcing base to Bangladesh, Vietnam, Colombia, etc.

Walmart has reduced its supply chain exposure to China, Costco has sourcing offices in a number of core markets beyond China. Gap Inc has reduced its apparel sourcing from China, from 28% in 2013, to 22% in 2017. And sources 25% of its requirements from Vietnam. Target Corp is concerned that business will be impacted due to the higher tariffs on Chinese goods.

However, retailers cannot shift supply chains overnight. It will take years to build supply chains as there may not be enough capacities in other countries to service the US demand for apparel. Moreover, US retailers who have already booked orders with China may need to find newer markets where they will not have to pay additional tariffs.