Walmart, other US companies raise concerns over proposed Trump tariffs

LCI Industries

19/11/2024 17:12

By Niket  Nishant, Shivansh Tiwary and Manya Saini
       Nov 19 (Reuters) - Corporate executives were taking a
wait-and-see approach to President-elect Donald Trump's vow to
impose heavy tariffs on imports when he takes office in January,
but many have raised concerns about the effect such levies will
have on inflation. 
    Numerous major U.S. corporations addressed tariffs at recent
investor events and on conference calls, including some after
the Nov. 5 election, when Trump edged out sitting Vice President
Kamala Harris. 
    Walmart  WMT.N , the nation's largest retailer, suggested on
Tuesday after reporting results that prices could increase if
tariffs rise.
    "We're concerned that significantly increased tariffs could
lead to increased costs for our customers at a time when they
are still feeling the remnants of inflation," a Walmart
spokesperson said.
    Trump has vowed to make tariffs, which are a fraction of
U.S. tax collections, central to his economic agenda. Executives
have been increasingly fielding questions on the subject, with
many noting ongoing efforts to continue to diversify their
supply chains, particularly away from China, Trump's top target.
    Since the beginning of September, executives from nearly 200
companies in the S&P 1500 Composite index  .SPSUP  discussed
tariffs on earnings calls or at investor conferences, nearly
doubling the same period in the run-up to the 2020 election, and
far more than the 23 mentions in 2023, according to LSEG data.
    "Roughly 40% of our cost of goods sold are sourced outside
of the U.S., and that includes both direct imports and national
brands through our vendor partners," Lowe's  LOW.N  CFO Brandon
Sink said on Tuesday. "And as we look at the potential impacts
(of tariffs), it certainly would add to product costs."
    Trump has floated the idea of 60% tariffs on China, the
world's largest exporter, and universal tariffs of 10% or more,
which he says is necessary to eliminate the U.S. trade deficit.
    Oxford Economics estimated a 60% China tariff could boost
U.S. inflation by 0.7 percentage points, and across-the-board
tariffs would boost inflation by 0.3 points. Oxford believes any
tariffs would be gradually introduced, but some analysts are
worried about a shock effect.
    "Trump 47 won't be a mere replay of Trump 45," said Brian
Jacobsen, chief economist at Annex Wealth Management, noting
that the president-elect's proposals now were "far more
expansive."  

    
POSSIBLE SECTOR EFFECTS
    The sectors that account for the most imports to the United
States include electronic products, transportation equipment,
chemicals and minerals, according to the U.S. International
Trade Commission. 
    Taiwan, a key partner for the crucial U.S. semiconductor
industry, was a target of Trump's rhetoric in the run-up to the
election. He suggested that Taiwan should pay for U.S.
protection against the threat of China - which claims the island
as its own territory - and accused it of poaching the
semiconductor industry.
    Any retaliation may affect U.S. tech giants like Apple
 AAPL.O , Nvidia  NVDA.O  and Qualcomm  QCOM.O , which count
Taiwan as a vital component of their supply chain. 
    Tariffs could raise prices on clothing, toys, furniture,
appliances, footwear, and travel goods, particularly items where
China is a major supplier, according to the National Retail
Federation, a U.S. trade group of which Walmart's U.S. head is
the chair. 
    "It is certainly one of the quickest things that could
happen, because it could kind of happen with the stroke of a
pen," Stanley Black & Decker  SWK.N  CFO Patrick Hallinan said
at a Robert W. Baird investor conference last week. He said
current tariffs are costing it about $100 million a year, which
could double under Trump's proposals.
    To be sure, companies started to shift production away from
China during Trump's first term, and continued to do so
following legislation passed during Joe Biden's term designed to
boost U.S. manufacturing. 
    U.S. goods imports from China peaked at $538.5 billion in
2018, according to U.S. Census Bureau data, and were $433.3
billion over the 12 months ended in September. 
    Businesses may also be better prepared to deal with shifts
following the COVID-19 pandemic, numerous labor strikes and
disruptions to key waterways like the Panama and Suez canals,
executives said.
    "We've had so many disruptions and challenges that have
forced us to make adaptions. We're pretty well versed in
managing through this," Tapestry  TPR.N  CFO Scott Roe said. 
 

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
U.S. imports from China by value    https://reut.rs/40L4LU8
Change in consumer price index by 2028    https://reut.rs/4eEf0wR
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 (Reporting by Niket Nishant, Shivansh Tiwary and Manya Saini in
Bengaluru; additional reporting by Aishwarya Venugopal and
Juveria Tabbasum in Bengaluru and Nick Brown in New York;
Editing by Anil D'Silva)
 ((Niket.Nishant@thomsonreuters.com;))