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All Eyes on G-20 as Additional Tariffs Loom

Last week, Bloomberg reported that Toys “R” Us is in the early stages of a comeback, led by former executive and Tru Kids Inc. CEO Richard Barry, with designs on opening about a half-dozen stores in time for the 2019 holiday season.

You can bet they’ll be keeping a close eye on the news from Osaka this week.

Tariffs – and the threat of new tariffs that would be levied against some $300 billion in Chinese imports – are expected to dominate much of the discussion at this week’s G-20 Summit, which is being held in Osaka, Japan on June 28 and 29.

Whereas the previous rounds of tariffs  imposed by the Trump administration have focused more on industrial and agricultural products, the administration’s current plan calls for slapping a 25% tariff on nearly every Chinese import – among them, consumer goods ranging from apparel and shoes to jewelry and electronic devices.

In a recent earnings call, Wal-Mart CFO Brett Biggs warned bluntly: “Increased tariffs will lead to increased prices for our customers.” Tim Cook, CEO of the world’s second-largest public company by market cap and arguably its most ubiquitous brand, recently met with White House officials in hopes of winning an exemption from the proposed tariffs for certain Apple products. You need only look at the back of your iPhone – most of which bear the words “Designed by Apple in California.  Assembled in China” – to understand the purpose behind Cook’s visit. (Of Apple, Inc.’s $266 billion in revenue last year, sales of the iPhone accounted for more than 60 percent.) The toy industry would, perhaps, feel the pain most acutely: today, roughly 85% of all toys sold in the U.S. are imported from China.

That the threat of tariffs has come amidst a realignment of legacy retailers – claiming as victims Sears, Sports Authority and Toys “R” Us, to name a few – has heightened the sense of anxiety among retailers. According to Coresight Research, American retailers have announced plans to close more than 7,000 stores so far this year, with that number expected to rise to as many as 12,000 stores. That would be double the number of store closings from 2018.

With retailers and manufacturers of consumer goods looking toward preparations for the holiday season while also contending with higher costs and staring down the threat of e-commerce, the question of whether the administration follows through on its threat to impose blanket tariffs or is able to rejuvenate negotiations on a new trade agreement with China bears watching this week in Osaka. 

Related topics: Retail, Retail Sales, Tax