Although major retailers have developed strategies to blunt the impact of tariffs so far, they warned that the trade war is impacting business. Shoppers will bear many of those costs.
AutoZone and Nike
Retailers argue higher costs from tariffs will force them to make a tough decision: Take up prices for consumers or eat the costs and take a profit hit. Most say they’ll raise prices, although it’s unclear when consumers might see higher costs on the shelves or by how much.
“If we do, in fact, experience higher costs, it will be our intention to pass those higher costs on to our customers,” Rhodes told analysts Tuesday.
Tariffs were a major focus during retailers’ latest batch of earnings. Twenty-nine retailers on the S&P 500 mentioned “tariffs” on analyst calls over the past three months, compared with just seven during the same period last year, according to a FactSet analysis.
However, the Trump administration dismissed the effects of tariffs on shoppers.
Cornell, Target’s CEO, said that the retailer’s wide range of merchandise was a “competitive advantage” and allowed it to balance the impact of tariffs “in ways not available to a single-category retailer.”
Still, an additional 25% tariff on all merchandise coming from China would wipe out all retail earnings growth over the next 12 months, according to Greg Melich, analyst at Evercore ISI.
Key link in the supply chain
Retailers have bought most of their merchandise for the coming months, according to analysts. But uncertainty around trade makes it difficult for them to plan their inventory for the winter holidays, said Simeon Siegel, analyst at Nomura Instinet.
Companies are “living on the edge of a tweet trying to plan for the long term,” he said. Tariffs come at a bad time for retailers already facing online disruption and rising labor and transportation costs.
Chinese labor and factories are crucial links in top US retailers’ supply chains and companies say there are obstacles to quickly adjusting their intricate supplier networks.
China is a “important sourcing country and consumer market for us,” Nike said in its annual securities filing.
“Footwear is a very capital-intensive industry, with years of planning required to make sourcing decisions, and companies cannot simply move factories to adjust to these changes,” shoe companies wrote in their letter to the administration.
Boost for Ollie’s and TJMaxx
Ollie’s, for example, believes it will benefit from the administration’s tariffs on Chinese goods. That’s because more companies will have extra inventory or will cancel orders as they race to import goods from China.
Correction: A previous version of this article incorrectly reported the state that Democrat congresswoman Cindy Axne represents.
— CNN Business’ Katie Lobosco and Donna Borak contributed to this article.