Daily Management Review

Trump Tariffs Would Impact American Firm’s Results


06/13/2019




Trump Tariffs Would Impact American Firm’s Results
The import tariffs on imported Chinese products by the Trump administration of the United States would weigh down on their results, warned a number of major American consumer companies.
 
These statements came from such companies came after US President Donald Trump increased import tariffs on Chinese goods worth $200 billion on May 10 from 10 per cent to 25 per cent. In addition, Trump has also threatened to impose fresh tariffs on $300 billion worth of Chinese goods which would include virtually everything exported to the US from China,
 
Reacting to the situation, Hubert Joly, CEO of best Buy Co Inc. told the media: “the impact of tariffs at 25% (proposed to be enacted) will result in price increases and will be felt by US consumers.”
 
Home Depot Inc said that its annual cost of goods sold would be increased by $1 billion if the current round of tariffs continues to exist. This would be in addition to a $1 billion hit to the company for import tariffs imposed in 2018. However, Edward Decker, executive vice president of merchandising, said that because the quantum of products that would be included in the new tariffs of the US on China could comprise of only 1 per cent of the company’s total sale, therefore the company would be able to manage the impact from new tariffs.
 
“We do anticipate a more meaningful impact on both our private and national brands if the potential fourth tranche of tariffs does go into effect,” said Jill Soltau, the CEO of J.C. Penney Co Inc.
 
The department store Kohl’s Corp it sources just 20 per cent of its products from China and the new tariffs would hit its imports of home and accessories from China but would exclude import of apparel and footwear currently.
 
The largest retailer of the world Walmart has said it could face some challenges because it is known for its low prices and therefore it would have to manage the effect of increased costs of its Chinese imports because of the tariffs on its customers and the company itself. “Higher tariffs will lead to higher prices for customers,” the company’s CFO Brett Biggs had told the media in an interview last week.
 
“The increase of the third tranche from 10% to 25% on May 10 does have some impact, particularly on our furniture business. However, the team anticipates that this can be mitigated,” Jeffrey Gennette, the CEO of Macy’s Inc. to investors on a conference call. “It’s too early to comment on what we think that’s going to mean in terms of potential price increases and what categories are going to be more affected than others,” he said.
 
The CFO of Ralph Lauren Corp said that the company is facing a limited impact by the tariffs implemented toil date but it is also getting prepared for various eventualities. The company has enhanced its speed of diversification of its global supply chain so that it can avoid the long-term impact of the tariffs.
 
Footwear maker Cross Inc expects to be hit by about $5 million in 2019 if the threatened 25 per cent tariff is imposed but expects to reduce the amount of products it imports from China to 20 per cent from current rate of 30 per cent in 2020.
 
“Our current sourcing mix reflects our need to balance ramping up incremental supply to meet the growing demand for our product and continuing our multi-year effort to reduce our sourcing from China,” The company said in a statement.
 
The food products company DelMonte also raised concerns about increase in transportation and labor costs in addition to tariffs that is troubling the company.“It’s an inflationary environment. A lot of that’s going to have to be passed on. The consumer is going to have to pay more for a lot of critical goods,” said the company’s CEO Greg Longstreet at a conference last week.
 
(Source:www.nytimes.com)






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