CONSUMER | 11/08/2024
The incoming President-elect Donald Trump administration’s suggested policies could have a significant impact on the retail sector. The costs of consumer goods, labor policies, interest rates, and the prospect of what may happen if the Tax Cuts and Jobs Act (TCJA) of 2017 sunsets in 2025 could all become major factors in the industry.
Consumer Goods and Tariffs: Implications Under the New Administration
The cost of consumer goods is largely influenced by the price of materials used in production or the expense of importing items. Proposed tariffs could lead importers to increase inventory costs for retailers, who may, in turn, pass these costs onto consumers, depending on their profit margins.
The incoming administration has indicated the possibility of imposing duties ranging from 10% to 25% on all imported goods. President-Elect Trump has frequently stated his intent to implement a 60% tariff on imports from China, occasionally suggesting even higher rates. Additionally, he has proposed tariffs of up to 25% on all imports from Mexico as a strategy to curb immigration. Given the broad scope of these tariffs, the retail sector, which relies heavily on imported consumer goods, may face significant financial challenges.
Automotive
Rising tariffs in the automotive sector could disrupt efforts to stabilize supply chains, posing challenges for automakers, retail dealerships, and their customers. These increased costs may ripple through the industry, affecting production and pricing.
The new administration may also seek to curtail provisions of the Inflation Reduction Act that support electric vehicle (EV) incentives and infrastructure development. Additionally, proposed measures to strengthen emissions standards could require automakers to prioritize the production of more fuel-efficient and lower-emission vehicles, potentially increasing manufacturing complexity and costs.
Food Exporter
With a significant portion of food supplies being imported, the new administration has proposed introducing tariffs on food imports. These tariffs may lead exporters to incorporate the added costs into their product prices, potentially raising consumer costs.
The administration is also considering deregulating aspects of the food industry and revising dietary guidelines. Additionally, plans to reduce funding for food assistance programs could further impact the industry and consumers relying on these resources.
Immigration and Retail: Potential Workforce Challenges
The retail industry relies heavily on minimum-wage employees, many of whom are immigrants.
Proposed immigration policies by the new administration, including potential deportations, could reduce the available workforce. This may result in increased labor costs, staffing shortages, and potential delays in product deliveries to consumers.
Potential Economic Changes Under Trump’s Presidency
The new administration has indicated a willingness to influence the Federal Reserve to maintain lower interest rates to stimulate economic growth. Lower interest rates could reduce borrowing costs, potentially leading to lower prices for retail goods.
Additionally, with the Tax Cuts and Jobs Act (TCJA) set to expire at the end of 2025, the administration has expressed an intention to make many of its provisions permanent. This could benefit retailers through continued tax advantages, such as the 20% qualified business income deduction.
How Chartered can help
Understanding the suggested proposals from the Trump administration and their direct implications on various facets of the retail industry can equip you with crucial insights to help navigate and potentially leverage these changes for your business. Chartered’s tax professionals will be keeping a close eye on the situation, so watch for more details to come as the new administration sets its policies when taking office.