retail watch | May 21, 2020 |
Is trouble with tariffs about to return?

Like the Tribbles on Star Trek, tariffs seem to be a trouble that just won’t go away. And now, as the president is threatening to ramp up his activities on these trade barriers once again, all those in the trade want to say is, “Really?”

In the middle of the worst global economic crisis in 90 years, with oil prices so low they threaten entire nations—and on the heels of what many thought were the first steps in resolving the turmoil caused by the Trump trade wars—American businesses had good reason to believe tariffs were the least of their problems.

But the president has other ideas.

Over the past week or two, in tweets and various statements to the press, President Trump has reignited his battle with China and indicated the topic of tariffs is back on the table.

While the two countries signed a trade deal in January, before the coronavirus reached global pandemic levels, the terms of that agreement have been difficult to adhere to given the worldwide economic slowdown. Speaking at a town hall meeting in early May, the president said that China needed to live up to its agreement to buy $250 billion in American goods. “Now they have to buy,” he said. “And if they don’t buy, we’ll terminate the deal. Very simple.”

When asked only a few days later if he would consider reworking the deal, he said no. “Not at all. Not even a little bit; I’m not interested,” he told the assembled press corps. “We signed a deal. I had heard that … they’d like to reopen the trade talk, to make it a better deal for them.”

For the home furnishings industry, the tariffs issue is of grave importance. Trump has made trade a key issue since he took office, and has thrown the entire global sourcing business into turmoil as companies have struggled to deal with a constantly shifting playing field. Many of the industry’s key products—including furniture, but also small electrics, home textiles and decorative accessories—have been subject to an ever-widening net of duties, sometimes as high as 25 percent.

While the Phase 1 deal with China did not eliminate any tariffs, it stopped further expansion of duties and offered hope that existing barriers would be reworked. More importantly, home furnishings importers had hoped the new agreement would signal a period of stability going forward. For many in the industry, negotiating new terms with Chinese and other Asian suppliers was difficult but manageable. Less manageable was the uncertainty fanned by the president’s wildly inconsistent and often inflammatory statements.

Of course, all of this tariff talk may have a lot more to do with politics than trade. The president has been on a tirade against China for the past month or so, blaming its handling of the pandemic crisis and hoping to deflect criticism of his own administration’s actions. Tariffs seem to be caught up in the commotion.

Nevertheless, as American business has seen before, this debate can go in many different directions—with both sides maneuvering for an advantage. “It’s in fact in China’s interests to terminate the current Phase 1 deal,” an unidentified trade adviser to the Chinese government told Reuters in a recent report. “The U.S. now cannot afford to restart the trade war with China if everything goes back to the starting point.”

The Reuters story also quotes Clete Willems, a former White House trade adviser who reportedly took an active role in the U.S.-China negotiations. “I don’t think we’re at the point where we should give up on the deal,” he said. “It has yielded positive results thus far.”

But unlike the Tribbles, there is nothing cute and fuzzy about tariffs—or their ongoing potential to wreak havoc upon the home furnishings business.

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For big-box lifestyle retailers, the store is the brand—until it’s notWarren Shoulberg is the former editor in chief for several leading B2B publications. He has been a guest lecturer at the Columbia University Graduate School of Business; received honors from the International Furnishings and Design Association and the Fashion Institute of Technology; and been cited by The Wall Street Journal, The New York Times, The Washington Post, CNN and other media as a leading industry expert. His Retail Watch columns offer deep industry insights on major markets and product categories.

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