Dive Brief:
- In an effort to mitigate the impact of the Trump Administration's most recent list of proposed tariffs on Chinese goods, Walmart has asked beauty vendors to look outside China, according to a report from Reuters. Walmart didn't immediately return Retail Dive's request for comment.
- Walmart did not comment to Reuters, but it directed the publication to commentary on tariffs expressed by Walmart CFO Brett Biggs during the company's second quarter earnings presentation last week. "We are closely monitoring the tariff discussions and are actively working on mitigation strategies, particularly in light of potentially escalating duties," he said at the time.
- Trade tensions between the United States and China continue to escalate, with tariffs being imposed by both sides. Moody's Investors Service last week warned that tariff talk could rattle retail.
Dive Insight:
Retailers have been dismayed at tariffs and the prospect of even more, and many may have escalated their shipments to avoid the worst. Imports have been at record levels this summer as retailers buy merchandise before some tariffs take effect, according to National Retail Federation's Global Port Tracker report.
The NRF last week warned that tariffs could upend the current momentum in retail, where a healthy economy is boosting sales beyond expectations. Tariffs of 25% on $34 billion in Chinese goods took effect in July, and tariffs on another $16 billion are scheduled to take effect this month. Another round on $200 billion in goods would include a broader array of consumer items and is expected to be finalized in September.
Avoiding tariffs would take time and depend on several factors, Moody's Retail Analyst Mike Zuccaro said last week, and that includes how swiftly they (or their suppliers) could shift manufacturing away from China and how much of the cost they're able to pass on to consumers.
Tariffs would be a credit negative for furniture and home goods, auto dealers, and apparel and footwear retailers, according to Zuccaro. Apparel and footwear retailers "could experience gross margin pressures for 12 to 24 months if tariffs are imposed," he said. The beauty segment is being threatened enough for Walmart to propose its suppliers significantly alter their operations.
But the effects of tariffs go beyond the supply chain, too. Even if retailers are able to mitigate their impact, they can't control the burden they may pose to their customers. Consumers may also be absorbing costs passed on to them by other industries affected by the tariffs and may face other rising costs that could hit their spending, Moody's warned.
