Shortly after Donald Trump began his presidential campaign in 2015, he urged shoppers to boycott Macy’s for dropping his clothing line.
Four years later, it’s Trump’s trade policies that are disrupting the Cincinnati-based retailer’s business, forcing CEO Jeff Gennette to negotiate concessions from Chinese vendors to counter the effects of tariffs the White House has imposed on a wide swath of Chinese imports.
The talks are a preferred alternative to raising prices, which Macy’s discovered this spring when it attempted to pass on the costs of duties that Trump had more than doubled on a $250 billion swath of goods from the world’s second-largest economy.
The price hikes were limited to luggage, housewares, and some furniture items, and “we learned from that experience that the customer had very little appetite for those cost increases,” Gennette told investors Wednesday during an update on the company’s financial outlook for the remainder of the year.
As a result, Macy’s plans no price increases this year to compensate for the effect of 10% tariffs that the Trump administration plans on most of the remaining $300 billion in goods the U.S. imports from China. Some will take effect Sept. 1, and others have been delayed until Dec. 15 to shield the lucrative Christmas-shopping season.
The retail industry, which contributes $2.6 trillion a year to the U.S. economy, welcomed the delay while continuing to oppose the White House’s protectionist trade policy. Its smaller members lack the financial buffer to absorb the tariffs, which they have to pay when their goods arrive in U.S. ports, and say they have no choice but to raise prices or lay off workers.
“Uncertainty for U.S. businesses continues, and tariffs taking effect Sept. 1 will result in higher costs for American families and slow the U.S. economy,” said David French, senior vice president for the National Retail Federation.”We urge the administration to develop an effective strategy to address China’s unfair trade practices by working with our allies instead of using unilateral tariffs that cost American jobs and hurt consumers.”
Even Macy’s itself, which garnered $5.5 billion in sales in the three months through early August, doesn’t expect it can absorb the impact of the latest tariffs should Trump raise them to 25% as he did with earlier duties.
“We’re leveraging our scale and our strong relationships with our sourcing partners as well as our vendor partners, who source out of China, so I think that 10% is manageable in the short and long term,” Gennette said. “When it goes to 25%, you’re dealing with a whole other series of dynamics that I would not say we wouldn’t have to raise prices.”
While Chinese tariffs have been a focal point of the administration’s trade disputes, the White House has also imposed duties on washing machines, solar panels, steel, and aluminum and threatened them on goods from cars and car parts to French wines.
Uncertainty about Trump’s strategy has curbed business investment and hiring, economists say, and the next round of Chinese tariffs — which include a variety of consumer goods — are likely to limit spending in the single largest section of the U.S. economy.
The confusion, combined with slowing global growth, has spurred bond-market indications of a looming downturn, and Bank of America economists see a 1-in-3 chance of a recession within the next year.
The administration, however, asserts that its trade moves will ultimately pay off with agreements that treat U.S. producers more equitably and boost the economy.
“We have to look at this as the chessboard, as the way of restoring the global economy to what you would want, a fair trade economy where everybody prospers; that’s not what we have,” White House trade adviser Peter Navarro told Fox Business Network on Tuesday. “It really does a disservice, I think, to this president to needlessly speculate and talk about trade wars.”
