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Home / Business / China's trade dispute could bully US retailers

China's trade dispute could bully US retailers



NEW YORK (Reuters) – The Trump government's trade dispute with Beijing could upset US retailers when tariffs are imposed and lead to higher prices or a shortage of goods.

FILE PHOTO: US President Donald Trump and China's President Xi Jinping shake hands after a joint statement in the Great Hall of the People on November 9, 201
7 in Beijing. REUTERS / Damir Sagolj / Archivfoto

President Donald Trump said late Thursday evening that he was considering $ 100 billion in Chinese goods, without specifying what goods he would target. That would be in addition to the proposed $ 50 billion in tariffs from China, which Washington presented last week. Trump's first round of $ 50 billion tariffs was mainly targeted at industrial goods and electronic components.

The threatened US tariffs could be little more than a bargaining tactic aimed at forcing China to engage with its IP policy. But some retailers and apparel companies are sounding the alarm.

The two largest categories of US imports from China last year were communications and computing equipment, which, according to US census data, totaled $ 137 billion. Mobile phones and computers, important parts of these categories, were spared from the original tariff list. Clothing and footwear, both labor-intensive industries in China, totaled US $ 39 billion.

"It's this $ 100 billion rhetoric that concerns us, because it certainly would be hard to exclude clothing and shoes in this next category pool," said Robert D & # 39; Loren, CEO of Xcel Brands Inc. , a clothing supplier to Macy's Inc, Hudson's Bay Co and others.

"If customs duties on clothing are to be introduced, I will travel to China on a plane the next day and work with my factories, suppliers and mills so that each one of us can assess how much closer we can work with it", he said.

FILE PHOTO: The label of a Washington DC sweatshirt bears an American flag, but says "Made in China" on a souvenir stand in Washington, DC, USA, January 14, 2011. REUTERS / Kevin Lamarque / File Photo

Jonathan Gold, Vice President of the National Retail Federation for Supply Chain and Customs Policy, also expressed concern about what the new tariffs might entail.

"Our concern is that the new tariffs will apply to more off-the-shelf consumer products and now to things like clothing, housewares, footwear, all these basic retail goods from China," said Gold.

"As companies make their purchasing decisions specifically for the holiday season they are doing six, nine to twelve months in advance, they are trying to figure out how to do so in the future."

Should a trade war follow, retailers with large global supply chains may suffer less than others. For example, Costco Wholesale Corp., Walmart Inc., Home Depot Inc. and Lowe's Companies Inc. have the ability to purchase products in multiple markets and could tap into alternative markets such as Vietnam, Bangladesh or Colombia for goods.

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"Many retailers will be fine, but you need to have other markets your products can go for," said Brandon Fletcher, analyst at broker-dealer Sanford C. Bernstein ,

"Six months ago, you agreed to buy a whole range of televisions from China, and now tariffs could impose a 25 percent higher price on you, so you say," OK, I want those not selling in the US because I have to pay the tariff. "Well, is there a tariff for China selling televisions to Mexico?"

Walmart has reduced its commitment to the supply chain in China over the years, As more cost-effective products from Vietnam have become available, while Costco maintains procurement offices in several core markets outside China, says Fletcher. By contrast, Best Buy Co Inc is heavily dependent on China to source smaller TVs and other reasonably priced goods, and there are no easy alternative supplier countries, he said.

Best Buy did not want to comment on how tariffs could affect the company's supply chain.

Dollar General Corp. imports a significant amount of imported goods from China, according to a company filing on March 23. A spokesman for Dollar General declined to comment.

At Target Corp., China is the largest single product source. In its annual report, it stated that the introduction of additional duties or duties on imported products could affect its business. "Like all companies, we are watching the situation very closely," said a Target spokeswoman.

As the cost of manufacturing goods in China has increased over the past decade, many retail and clothing companies have shifted production to Vietnam, Bangladesh and Indonesia. For example, in 2013, Gap Inc bought 28 percent of its clothing in China, according to Christopher Svezia, senior vice president of research at investment firm Wedbush. By the 2017 financial year, the apparel chain was buying 22 percent of its goods in China and 25 percent in Vietnam, he said. "There has been some movement in China down the line," said Svezia.

Gap did not respond immediately to a request for a comment.

"You can not just say, let's go to Pakistan or North Africa, it's not that easy," said D & Loren of Xcel Brands. "It will take years to expand the supply chain, and even if you have the capital, you will not be able to find the factories," he said. "Production lines are booked months or years in advance."

Reporting by Nandita Bose and Melissa Fares in New York; Additional reporting by Lisa Baertlein in Los Angeles and Aishwarya Venugopal in Bangalore; Editing by Tom Brown and Chris Reese


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