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Trump's Tariff Proposal Raises Concerns of Higher Prices and Inflation for Consumers

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US President Donald Trump pauses while speaking at the Economic Club of New York at the New York Hilton Midtown November 12, 2019, in New York, New York. BRENDAN SMIALOWSKI/AFP via Getty Images

As President-elect Donald Trump prepares to return to the White House, his proposal to impose tariffs on imported goods has raised significant concerns about rising consumer prices.

Trump has outlined a plan for tariffs ranging from 10% to as high as 100% on imports, particularly targeting goods from China and Mexico. While Trump argues that these tariffs would encourage American manufacturing, analysts and industry groups warn that the policy could lead to a rise in the cost of everyday items, contributing to inflation and burdening US families.

Retailers Warn Tariffs Could Hike Prices by 20%

The National Retail Federation (NRF) and other retail industry groups have voiced concerns that the tariffs would act as a "tax on American families."

According to CNBC, by increasing the cost of importing goods like apparel, footwear, electronics, and home goods, prices in stores would likely rise as companies pass these added expenses on to consumers.

According to a recent NRF study, such tariffs could result in double-digit price increases in essential retail categories, including clothing and household items. For example, the cost of clothing alone could jump by as much as 20%, making it harder for families to manage their budgets.

Retailers who depend heavily on imports from China are particularly vulnerable. Companies like E.l.f. Beauty, which sources much of its production from China, say they may have to raise prices if the tariffs take effect. E.l.f. CEO Tarang Amin noted that his company has been diversifying its supply chains since previous tariff hikes in 2019, reducing its reliance on China.

However, he acknowledged that rising tariffs would still put pressure on pricing, potentially forcing consumers to pay more for their favorite products.

Industry analysts are also concerned that these tariffs would disrupt retail and consumer spending at a time when inflation has only recently shown signs of cooling.

GlobalData's Neil Saunders explained that retailers would face tough choices: either absorb the increased costs themselves, which would hurt their profits, or pass those costs to consumers. Given that many shoppers are already sensitive to prices, even modest increases could drive down spending and overall retail sales.

Trump's Tariff Proposal Could Mean Higher Prices on Everyday Items

Bank of America analysts noted that certain retailers with a high percentage of imports from China, such as Five Below and Skechers, may struggle to maintain affordable prices. Dollar stores, which rely on fixed prices, could also be significantly impacted, as it would be difficult for them to adjust their pricing structures without alienating cost-conscious customers.

Even popular brands like Yeti and AutoZone, with established consumer bases and higher profit margins, are likely to raise prices to offset the tariff costs, affecting everything from outdoor gear to car parts.

Food and beverage items might also be hit by higher costs due to tariffs on imported ingredients. Popular brands like Constellation Brands, which makes beers like Corona and Modelo, and Mondelez, known for snacks like Oreos, could face higher import costs.

This might translate to price hikes on everyday treats, impacting the affordability of many household staples.

While Trump's tariff plan aims to encourage domestic production, experts argue that it is unlikely to bring immediate relief, Forbes said. Shifting entire supply chains back to the US is a complex and long-term process, especially for industries like electronics and footwear that rely on established manufacturing bases in Asia.

According to Footwear Distributors and Retailers of America, almost all shoes sold in the US are made overseas, making it challenging for manufacturers to adapt quickly.

As Trump prepares to assume office, consumers may need to brace for potential price increases. If the proposed tariffs are enacted, they could contribute to inflation, affecting a wide array of products that American families rely on.

This economic impact could further stress household budgets, especially for low-income families who may feel the effects most directly. For now, both businesses and consumers are left wondering just how high the price tag on Trump's tariff policy might be.

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