Retail Unwrapped from The Robin Report

Tariff Shockwaves

Sarah Holbrook — Mon, 09 Jun 2025 04:01:00 +0000

When President Trump stood next to his super-sized tariffs chart on April 2nd, he looked wholly satisfied as he actualized his very own shock and awe moment. The world was expecting tariffs, but not a worldwide economic cataclysm. Now, the globe is in the throes of motion sickness as the tariff yo-yo continues to wind and unwind, following an all too predictable pattern.

The time to start drawing the roadmap for the coming 24 months and beyond is now. Just make sure to add elevations and alternate routes to that roadmap, it is going to be a steep climb full of twists and turns.

Blindsided

Narrowing the focus to retail, the industry can’t be blamed this time for being caught flat-footed. Many retailers anticipated a moderate increase to the already existing tariffs on China. We searched for any analysis or warning signs that tariffs might be imposed on goods from Vietnam, India, Bangladesh, Germany, and well…everywhere except Russia and North Korea. No one expected the destructive (and self-destructive) scope and scale of the scheme; neither short sellers nor Cassandra got this one right.

Now two months into the madness, while we may feel ill, we are no longer shocked or awed. Wall Street has developed the TACO investment strategy, aiming to profit from the tariff gyrations, but collective consensus concludes that neither a plan nor fact-based roadmap exists. The OECD (Organization for Economic Co-operation and Development) surmises that the U.S. will bear the heaviest brunt of Trump’s tariffs. Quartz covered the OECD report on tariffs in a piece titled, “America is the biggest loser in Trump’s trade war, OECD says.” The Quartz article concludes, “The result isn’t always an immediate shock. More often, it’s a slower burn, where uncertainty and higher costs quietly erode economic momentum quarter by quarter.”

As the slow burn commences, the retail industry is shifting from paralysis to stumbling through, paying increased freight fees while rushing to land merchandise before the next possible tariff cliffs in July and on August 15. This is no way to run a railroad, nor IKEA U.S., Printemps U.S., or NIKE.

Tune Out the Short-Term Noise

TRR is not a news publication; we mete out strategy. As these words spill onto the page, a federal court has found many of Trump’s tariffs illegal, the administration appealed, and then the administration won a stay. The opposite may be true when you read this piece. Rather than react to the drama du jour, we have been thinking about the bellwethers that are signaling the medium and long-term effects of this disruptive circumstance, and how it may compound and complicate pre-existing and ever-present concerns.

If Trump wakes up tomorrow and decides to tactically unwind the tariffs on every country, spinning it as part of his plan all along, things will not magically snap back to where they were. This tactic will have a long tail. Beyond the complexities of shattered trust, other obstacles loom. Logistics have been splintered, ships are not where they should be, and their crews displaced or furloughed. Global consumer sentiment has likely changed leaving international consumers with a diminished appetite for importing U.S. brands (think New Balance, Jack Daniels, Ralph Lauren). Retailers placed aggressive, uninformed bets, accelerating inventory purchases with more urgency than planning. Further complicating strategy is the hard truth that the tariff issue does not exist in a vacuum. The system has been damaged. No matter what unfolds in the coming weeks, Q3 will bring empty shelves, higher prices, and declining demand. The White House does not control the basic laws of economics, nor can it escape the axiom, you break it, you own it. The time to start drawing the roadmap for the coming 24 months and beyond is now. Just make sure to add elevations and alternate routes to that roadmap, it is going to be a steep climb full of twists and turns.

Bellwethers

While considering your next steps, these are five disruptive signals to watch for:

Slowing consumer spending
Rising unemployment rates
Rising consumer bankruptcies
Rising avian to human bird flu transmissions
Eroding U.S. China relations

Slowing Consumer Spending

While the signals are weak, the May 30 estimates from the Bureau of Economic Analysis show that consumer discretionary spending dropped in April. April’s expenditure estimates on apparel and footwear dipped 3.4 percent, and other non-durable goods purchases dropped 5.9 percent. The impact of April’s decline will be reflected in the second quarter reporting, but PepsiCo joined Proctor & Gamble, Chipotle, and others in reducing the 2025 full-year profit guidance. The consumer goods giants and burrito stalwart blamed slowing sales on reduced consumer spending according to reporting in the New York Times. PepsiCo cut its 2025 profit outlook from the mid-single digits to even with the company’s 2024 results, while reporting a 1.8 percent decline in Q-1 2025 revenue during the company’s recent investors’ call. The Times quotes Jamie Caufield, PepsiCo’s C.F.O., “Relative to where we were three months ago, we probably aren’t feeling as good about the consumer now.”

Rising Unemployment Rates

Unemployment rates remained steady in April at 4.2 percent while many government employees and contractors scattered throughout the United States are currently on paid leave. While this cohort is technically employed, the future employment status of many government workers is uncertain.

While Walmart is showing no signs of “eating” the tariffs, the company was the first major retailer to announce staff cuts. It announced 1500 layoffs in the company’s Global Technology Team. Walmart may be the first but watch this space. There are already murmurs from Costco, Best Buy, Target, TJX, Macy’s and Urban Outfitters, according to The Wall Street Journal.

Rising Consumer Bankruptcies

The New York Fed recently released a mix of good and bad news in its Q1 household debt and credit. Total household debt increased by $167 billion and stood at $18.20 trillion by the last count. The agency reported, “Credit card balances fell by $29 billion from the previous quarter to stand at $1.18 trillion; auto loan balances declined by $13 billion to $1.64 trillion, marking only the second time balances have fallen from a prior quarter since 2011.” However, the awakening burden of student loan debt paused since 2020, and grew by $16 billion to reach $1.63 trillion. Gen X borrowers nearing retirement age owe a portion of the debt.

Buy-Now-Pay-Later platforms are showing signs of stress. Public Media’s MARKETPLACE reported on BNPL debt balances. “Affirm users have an average outstanding balance of $736, and the 30-day delinquency rate stood at 2.4 percent for the first three months of this year, according to company reports.” In the broadcast, Senior Litigation and Policy Council for the Center for Responsible Lending Nadine Chabrier suggested that BNPL consumers tend to be “financially vulnerable.”

In January, shortly before major staff and service reductions, the Consumer Financial Bureau released findings. The Bureau discovered that more than one-fifth of consumers using BNPL loans in 2022 had subprime or deep subprime credit scores. The CFPB research also revealed that “More than three-fifths of BNPL borrowers held multiple simultaneous BNPL loans at some point during the year, and one-third had loans from multiple providers.” New York State is looking into regulating the lenders.

After reading these statistics, it should come as no surprise that Americans are increasingly bankruptcy curious. Consumer Affairs consulted data gathered by Legal-Shield, a legal service provider. “Americans making legal inquiries for declaring bankruptcy reached their highest levels in the first quarter of 2025 since 2020,” said Matt Layton, LegalShield senior vice president of consumer analytics. Layton continued, “Consumer bankruptcy concerns are rising not because of short-term volatility, but due to sustained financial pressure on household budgets.”

Rising Animal-to-Human Bird Flu

While only one animal-to-human death has been reported and the risk to the general population is low, the CDC reports the risk to humans exposed to infected animals is moderate to high. Had Covid never happened, one might read this report with a shrug, but it did, and no one should. Rather than simply shrugging, Health and Human Services Secretary Robert Kennedy Jr. seemingly discounted any concerns as his department canceled a $766 million government contract with Moderna to develop a bird flu vaccine. We know and understand the risks, should this grow out of control, to our industry, the economy, and humanity. Again, watch this space.

Eroding U.S.- China Ties

This area is heavily covered in general news. We will simply highlight areas of specific concern to our industry.

Rising Risk of Conflict in the Taiwan Strait
An invasion or hot war involving Taiwan would disrupt global access to advanced semiconductors. Taiwan produces over 90 percent of the world’s most sophisticated chips, which are foundational to everything from AI-driven retail personalization to mobile commerce, smart logistics, and cloud infrastructure. A disruption here is not theoretical—it would be catastrophic for both operational continuity and innovation roadmaps.
S. China Semiconductor and Tech Escalations
The ongoing U.S. semiconductor ban, and China’s countermeasures, including the suspension of exports related to aircraft and high-end chipmaking materials, signal that we are entering a phase of prolonged economic warfare. This affects not only chip availability but also global price volatility and supplier unpredictability for tech-enabled retail. While government incentives like the U.S. CHIPS Act are signals of a pivot toward onshoring, timelines are long, and capacity short-term is limited.
Rare Earth Minerals & Magnetic Leverage
China’s tightening of exports of rare earth minerals, used in electric motors, batteries, and high-efficiency manufacturing, reinforces the uncomfortable truth: The U.S. does not control all strategic levers in the tariff race. As tariffs rise and supply lines shrink, retail infrastructure, especially in logistics and automation, may become costlier and slower to upgrade.
Targeting Chinese Students and the Erosion of Soft Power
S. visa restrictions for Chinese students raise questions about whether the U.S. is playing offense, defense, or committing an own goal.
Global Realignment of Alliances and Trade Agreements
Watch for emerging regional alliances (such as ASEAN-led trade blocs or BRICS currency moves) that may signal a shift away from Western-dominated global trade norms. This can impact sourcing decisions, shipping routes, and even the relative importance of current markets.

Eyes Open

This is a complicated time to lead a retail organization or brand. Long-term strategies are easy to advise but challenging to develop. A deeper challenge is nurturing a nimble, anticipatory culture, particularly in times of stress. We encourage you to start by keeping your eyes open for the non-obvious signals that will impact our industry and lay the foundation for future success by having the courage to think about the unthinkable and prepare for the climb out of this mess.

U.S. China Tariffs: All Fluctuated Up

Warren Shoulberg — Thu, 15 May 2025 04:01:00 +0000

The latest news that China and the U.S. have agreed to a 90-day ceasefire — albeit with tariff rates still substantially higher than before all of this started — has thrown the retail industry into yet another stage of panic as they scramble to see if they can get merchandise into stores (and consumer hands) for the holiday season. And if they can do it at tariff-impacted prices that may still be unacceptable to an increasingly shell-shocked shopper.

Mattel is saying to expect 20 percent increases in the cost of Barbie and some of its other toys. Proctor & Gamble is warning shoppers of single and even double-digit increases in Crest toothpaste and Tide detergent. Closer to the fashion and consumer products fields, companies aren’t tossing out percentages yet but on virtually every quarterly analyst call and financial report, they are saying their prices will go up.

American Retail Under Siege

From a near shutdown of the global supply chain to the start of ominous warnings of higher prices on everything from automobiles to Barbies, plus the looming shadow of a possible recession — or worse — the tariffs and the threat of tariffs are having a devastating impact on America.

While the biggest hit could come to retailers and suppliers in the holiday and seasonal sectors with huge shortfalls of goods on store shelves and under Christmas trees in December, there is so much more that is starting to go wrong. And it’s only the middle of May.

Ho-Ho-WTF?

I’d like to amplify my Robin Report colleague Ross O’Brien’s tariff dispatch from his Hong Kong headquarters. For many businesses, the Christmas selling season represents as much as a quarter of their overall sales and far more of their profits. There is no disputing it’s the most wondrous time of the year — for making money. So, the tariff story is playing out at absolutely the worst timing for these businesses, particularly in the retail sector.

Other than the giants like Walmart whose order sizes dictate working further in advance, retailers normally place their holiday seasonal orders sometime between January and early spring. The sequencing is that overseas factories — and as much as 90 percent of all holiday-related goods come from China — start to ramp up production right after they get back from the Lunar New Year’s break and continue through to about mid-summer. Again, specifics depend on the size of the order and the complexity of the manufacturing process.

Goods start leaving Asia in late April and early May, taking about a month to cross the Pacific and arrive at West Coast ports during the summer months. Then in another week or two they reach the East Coast. Next, the containers are sent to distribution centers for retailers, wholesalers and other distributors by rail and truck. Finally, those goods are trucked to local retailers, arriving in the fall to be put on store shelves and into online DCs’ fulfillment centers. (And note this process starts even sooner and moves faster for merchandise for back-to-school and Halloween selling seasons that are critical for many retailers.)

All of this happens just in time for consumers who begin to shop for the holidays from mid-October all the way through Christmas Eve. It’s a carefully choreographed dance timed to get everything where it belongs, not a minute too soon and absolutely not a minute too late. It seems crazily high-risk, but it works…until this year.

Doors Wide Shut

Now, with this latest twist of the tariff knife everyone throughout the supply chain needs to jumpstart the sourcing process. Factories in China that have been largely shut down in the absence of incoming orders from U.S. customers now have to reopen their manufacturing lines and get their workers — who were laid off and often sent back to their villages hundreds or even thousands of miles away — to come back to work.

In the meantime, ports in Shanghai and elsewhere in China are backed up with containers that aren’t being accepted by importers because up until now suppliers have been worried that deposits will be abandoned given the new cost structures. Shipping companies also haven’t been accepting these containers, freaked out that they will get stiffed.

The result on China’s side of the Pacific was that nothing — or virtually nothing — was moving and all those holiday goods that should be making their way through the pipeline are stuck at various chokeholds…or worse, haven’t even been manufactured yet. All of this now has to somehow get restarted at the same time that these giant logjams are relieved.

On this side of the Pacific, ports on both the East and West Coasts have similar issues of clearing out backlogs, bringing back workers and getting back up to speed. Same for the truckers, railroads and distribution centers that slowed down due to lack of traffic.

That choreography will be in slow dance motion for weeks if not months before the pace picks up. If you don’t believe that, you have a very short memory of Covid just a few years ago. And every day that has ticked away, distracted by political diatribes and delusions, is one less day to get this merchandise into stores on time. The big question: Is it already too late? Virginia, frankly it’s hard to say if there will be a Santa Claus this year.

Supply Chained

Let’s not forget the details of this latest trade deal…and based on previous Trumpian proclamations it may or may not be true. Remember that his headline-grabbing news that a deal with the U.K. seems to not be a deal at all, but rather a framework for a possible conversation for an agreement that could or could not happen. This administration is infamous for talking first and fast, grabbing attention and then eventually filling in the blanks…or not. Let’s not forget too how other trading partners will view this game of chicken where Trump blinked first.

And even if this new China deal is for real, there is still a 30 percent duty on everything coming out of the country. It’s even higher — maybe 55 percent — on anything made of steel, aluminum and other metals. That’s a lot of extra cost for importers to suck up.

A women’s top that was costing out at $14 and retailing for $29.99 will now be an $18 cost and needs to retail at $34.99 — and that’s on sale. A piece of furniture that previously cost $500 and sold in the U.S. for $999 will now cost $650 and will need to retail for $1299. A set of sheets that previously cost an importer $25 and retailed for $49.99 now will be $32.50 and need to retail for $65. A set of metal cookware that carried a $75 cost and retailed for $149.99 will now cost $116 and have to be retailed for $229.99. And these prices apply if the retailer cuts their margins.

And don’t forget this is a 90-day deal. What happens after that? What happens after the 90-day window closes for all the other tariffs from the rest of the world that are currently on hold? And to makes things even more complex, now what happens to Apple facing a 47 percent tariff applied to Vietnam after moving its manufacturing out of China when it faced 147 percent levies.

Paying the Price

If you’re a giant corporation like Ford or GM you’ve already said these tariffs are going to cost your company billions of dollars. And that’s just what they know so far. And if you’re a consumer, the cost to you will be with fewer zeroes but every bit as impactful relative to the size of your budget. Mattel is saying expect 20 percent increases in the cost of Barbie and some of its other toys. Proctor & Gamble is warning shoppers of single and even double-digit increases in Crest toothpaste and Tide detergent.

Closer to the fashion and consumer products fields, companies aren’t tossing out percentages yet but on virtually every quarterly analyst call and financial report, they are saying their prices will go up. Not if, but when. And a when that conceivably is about to start.

Left unsaid is the very real possibility that we are likely to fall into recessionary territory because of higher prices and lower demand, coupled with lower supply. This isn’t like the pandemic when the demand was high even if the supply wasn’t. This is worse. Much worse. And it’s passed the point of no return to prevent it.

Once more, it’s the uncertainty as much as the numbers that make running your business next to impossible. Sure, there’s a new set of rules in effect today — but for how long? What if this deal falls through because one side or the other changes their mind — or gets pissed off about something that the other guy said? This is not conjecture. This is real.

Correct that: this is unreal.

The Looming Tariff Threat: Are You Ready?

Johan Gott — Tue, 11 Dec 2018 00:00:36 +0000

Tariffs were a huge talking point for most of 2018. However, by the midterm elections, tariff concerns barely registered a blip on the radar in all but a handful of rural districts across the United States. Media mentions have died down and companies are adjusting to the new normal. However, that doesn\’t mean that the threat of tariffs has passed; there is unquestionably more turbulence to follow.

But first, the positive news. The negotiations around the US-Mexico-Canada Agreement (USMCA), which will replace NAFTA, were completed on September 30, 2018 and signed by the countries\’ leaders exactly two months later. The threat of this front of the trade war looks to be averted for now. Even with the Democrats in control of the House of Representatives next year, the risk is low that this deal will be derailed. Retailers-and grocers, in particular-can breathe a sigh of relief knowing they will miss what would have been a $5 billion direct hit on their bottom lines.

Now for the bad news. The trade war with China appears to be intensifying. Unless a deal is struck with China, the Trump Administration will raise the 10 percent additional tariffs currently in place on Chinese goods to 25 percent. After the recent meeting between Donald Trump and Xi Jinping in Buenos Aires, the deadline was extended from January 1, 2019 until the end of February. Despite the temporary truce, the U.S. and China are still far apart on many issues, making a new deal appear unlikely even before the extended deadline.

A 15 percent increase represents a significant impact on retailers, with a projected $30 billion in additional tariffs collected. Unfortunately, this increase is not the only trouble on the horizon for retailers. Washington is also considering further tariffs on all imports from China-approximately $267 billion worth of products. The Office of the United States Trade Representative (USTR) has a list of more than 5,700 goods that will face tariffs under Section 301 of the Trade Act. Many of these imports are consumer goods, including food products, beverages, personal care, and furniture, which up until this point have avoided tariff increases. Retailers will feel the direct impact of these immediately.

Beyond China, there are other worrisome developments ongoing with Japan and the EU. One important, yet less discussed, concern is the Section 232 automotive tariffs which are the focus of increased trade conversations in Washington. If these tariffs were enacted, it would open yet another front of the trade war, and both Japan and the EU can be counted on to retaliate in kind to maximize political and economic damage in the US.

Ongoing gridlock over the future of the World Trade Organization (WTO) is also looming; the US is refusing to appoint new judges to the WTO for the upcoming term. Without a conflict resolution mechanism in place for the multilateral trading system by the end of 2019, trade could be entering uncharted territory. While G20 leaders committed to reform the organization, such a process is difficult even in the best of times. And with growing economic tensions between countries, these are not the best of times.

Although the tariffs have faded as a talking point, the uncertainty around tariffs has not. It\’s retailers who should be paying attention and, more importantly, developing a plan for the impact of tariffs on the global market.

What should retailers do to prepare?

One way to help mitigate the looming risk posed by tariffs is through transparency. That starts with the origins of the supply chain. Understanding where supplies (and their suppliers) are coming from can allow retailers to calculate value at risk. There has been little in the way of trade risk over the last few decades. Thus, most companies don\’t have a system in place to quickly estimate the damage from tariffs and other trade actions, leaving the potential to be caught unawares.

Retailers need to have a solid understanding of not only new tariff proposals, but also what is churning its way through Washington machinery. Particular attention needs to be paid to how trade actions will impact bottom lines over the next 6-12 months. Using scenario planning, retailers can run simulations to determine what impacts will happen over extended periods. These outcomes can affect decision-making around both sourcing strategies and supplier relationships over the long term.

It\’s also necessary to develop strategies and action plans for the steps taken once a new tariff becomes a reality. Companies will need to lock up alternative supply sources. It\’s likely that the companies with action plans in place will not be caught flat-footed, and thus have a chance of gaining a competitive advantage over the market.

In capital cities across the world, from Washington to Beijing, governments are operating in preparation for a trade conflict that is looking more certain than ever. Retailers need to do the same. As tariff lists continue to grow, strategies that address not only direct impacts from trade, but also ripple effects, need to be prioritized now.