When U.S. retailers look at the tariffs President Trump imposed on steel and aluminum imports Thursday, all they see is a tax.
One they fear will wipe out any growth in consumer spending on items from designer jeans to wide-screen televisions by eroding the bump in worker earnings from last year’s income-tax changes.
The duties of 25 percent on steel and 10 percent on aluminum are “an unnecessary tax on every American family and a self-inflicted wound on the nation’s economy,” said Matthew Shay, head of the National Retail Federation. “Consumers are just beginning to see more money in their paychecks following tax reform, but those gains will soon be offset by higher prices for products ranging from canned goods to cars to electronics.”
Retailers, who employ 42 million U.S. workers and account for more than 10 percent of the $20 trillion U.S. economy, fear the Trump administration is igniting a trade war in which “the net losers will be the very people the president wants to help,” Shay added.
The S&P 500 Retail Index fell 2.1 percent Thursday as news of the president’s action spread, compared with slight gains on the three major market gauges. Store chains from Macy’s to Dollar General and Victoria’s Secret parent L Brands were among the day’s worst performers on the S&P 500, posting drops of 3.3 percent or more.
Trump has indicated he wants to use the tariffs to renegotiate the North American Free Trade Agreement in the U.S.’s favor, heightening concerns that the treaty might dissolve. Potential duties on Chinese imports, which total $648.5 billion, would only exacerbate the effects of that action, economists caution.
While the tariffs are intended to buoy U.S. businesses by curbing competition from foreign companies, imports are pivotal sources of raw materials, said Ryan Sweet, director of real-time economics at Moody’s.
“If you disrupt imports or you make them more expensive, that could ripple through a good portion of the supply chain and have a significant adverse effect on manufacturing and do more harm than good,” Sweet told the Washington Examiner.
The tariffs imposed Thursday won’t take effect for 15 days, and Trump left open the option of modifying or removing the duties for individual countries through trade or security concessions.
Canada and Mexico are both exempted if they renegotiate NAFTA to the president’s satisfaction; if they do not, Trump threatened again to scrap the pact.
