Donald Trump’s latest tariffs on imports from China, Canada, and Mexico are undermining consumer confidence and sending shockwaves through the retail industry in both the US and Europe. Even the fact that he announces and then postpones tariffs is raising uncertainty. And this makes major players bracing for significant disruptions to their supply chains and pricing strategies, with many warning of imminent price increases for consumers, eToro analyst for Romania, Bogdan Maioreanu writes.
In the US, retail giants are sounding the alarm about the potential impact on their businesses. Walmart, the nation’s largest retailer, acknowledges that it won’t be “completely immune” to the tariffs. According to CFO John David Rainey about two-thirds of Walmart’s merchandise is sourced domestically. This is why the company will likely see some effects, particularly from tariffs on Canada and Mexico. However, the company learned a lot from the past tariff war and is preparing to collaborate with suppliers, enhance private label offerings, and adjust its supply chain to mitigate costs.
The electronics retail giant Best Buy which is heavily reliant on imports from China and Mexico, expects a highly likely price increase for American consumers. While Best Buy only directly imports 2-3% of its goods, the company relies on vendors and is very likely that these will be passing along tariff costs. The electronics retailer could see prices jump by 11% on items like laptops, tablets, and smartphones.
Tariffs are regressive taxes and the typical American family could face higher annual costs of between $1,600 to $2,000 due to the new tariffs, according to a new analysis from the Yale Budget Lab, a nonpartisan public policy research center. Losses for households at the bottom of the income distribution would range between $900–1,100.
Trump also threatened Europe with tariffs but our continent is not directly impacted yet. Retailers are closely watching the situation as it could reshape global trade dynamics. The European retail landscape is dominated by companies operating in the food sector and largely concentrated in Western countries, especially in Germany and France. Large retailers, such as Germany’s Schwarz-Gruppe (owner of Lidl), Aldi, and Carrefour may face indirect consequences if global supply chains are disrupted but the reliance on European products might mitigate the risks.
Luxury goods manufacturers in Europe, such as LVMH, Hermès, and Burberry, could see slower sales growth if US tariffs lead to reduced spending by American consumers on high-end European products. These companies derive significant revenue from the US market and may need to reassess their pricing strategies.
Some retailers, however, see potential opportunities amidst the disruption. Off-price chains like TJ Maxx/ TK Maxx might capitalize on increased inventory as companies rush to import goods ahead of tariff deadlines. E-commerce marketplace Etsy and resale platforms like ThredUp also view themselves as potential beneficiaries, expecting price-conscious consumers to turn to alternative or secondhand options if retail prices increase. Also, in Europe consumers might capitalize on lower prices that Chinese exporters might quote to sell their excess production that decrease consumption on US markets might make available.
The US National Retail Federation has warned that as long as the tariffs remain in place, it will only hurt American households and businesses that strive to provide customers with the products they want and need on a daily basis. This sentiment is echoed across the retail industry, with many retailers facing the difficult choice of absorbing higher costs, passing them onto shoppers, or a combination of both. As the situation unfolds, retailers on both sides of the Atlantic are reevaluating their strategies to navigate this new trade landscape.
Investors are also bracing for impact. The S&P 500 Retail Index has already lost 10% this year. For some more context, this isn’t the first time we’ve been here, as in 2018, when Trump introduced tariffs on China. The trade war’s major market impact came in waves, with the impact lingering during that year. Each escalation triggered a sharp sell-off and surge in volatility, and each truce or trade deal sparked relief rallies. The S&P 500 fell 10% at the start of the year, but the market eventually clawed back. However, as tensions escalated, the S&P 500 had sunk 19.8% below its late-September peak by Christmas Eve 2018. By the final months of 2019, the worst of the trade war market volatility began to subside, with the S&P 500 finishing the year up 29% before rallying 16% the following year and 26.8% the year after. This is why investors should keep their cool and focus on their long-term investment strategies.
Romanian consumers may be affected by Trump’s tariffs if they escalate into a global trade war
