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The economic horizon has one dark cloud

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As this issue of MMR goes to press, the economic forecast for the retail industry looks bright. Unemployment is low and the stock market is high. Consumer confidence is strong, and retail sales projections for the rest of the year, including the holiday season, are rosy. There is really only one dark cloud on the horizon, but retailers are afraid it could be a big one. It’s the possibility of a protracted trade war with China.

On September 17, the Trump administration announced 10% tariffs on $200 billion worth of imports from China. The tariffs, which were set to go into effect on September 24, will increase to 25% at the end of this year.

“Every time this trade war escalates, the risk to U.S. consumers grows,” National Retail Federation (NRF) president and chief executive officer Matthew Shay said. “With these latest tariffs, many hard-working Americans will soon wonder why their shopping bills are higher and their budgets feel stretched.”

Walmart made a similar point in a letter it sent earlier last month to U.S. Trade Representative Robert Lighthizer. The company said in its letter that tariffs on Chinese imports may force it to raise the prices on the merchandise in its stores.

“As the largest retailer in the United States and a major buyer of U.S. manufactured goods, we are very concerned about the impacts these tariffs would have on our business, our customers, our suppliers and the U.S. economy as a whole,” Walmart wrote.

Retailers have been warning for months about the risks that tariffs pose to the U.S. economy, and they are continuing to raise their voices. Last month the NRF, the Grocery Manufacturers Association, the Retail Industry Leaders Association and the National Association of Chain Drug Stores were among the 80 trade groups that formed Americans for Free Trade, a coalition representing U.S. manufacturers, farmers and agribusiness; retailers; technology companies; service suppliers; natural gas and oil companies; importers; exporters; and other supply chain stakeholders.

“Every sector of the U.S. economy stands to lose in a trade war,” NRF’s Shay said.

The coalition expressed its concerns in a letter to congressional leaders, perhaps hoping they could help it convey the message that the stakes for the entire U.S. economy are high, and trade wars are, in fact, not “easy to win.”


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