Retail Unwrapped from The Robin Report

A Leading Economist Weighs In on the SCOTUS Tariff Reversal

Retail Unwrapped — Fri, 27 Feb 2026 05:01:00 +0000

The recent Supreme Court decision outlawing the “Liberation Day” tariffs has added another level of uncertainty to the financial outlook of American retailers. Join Shelley and Dan Altman, chief economist and bestselling author of the High Yield Economics newsletter, as they zero in on what the ruling will trigger for retailers and consumers. They discuss whether companies will claw back the tariffs they have paid. Dan says that although companies and the government have records of the money that was paid, it could be sorted out but would be extremely messy. He adds it would be nearly impossible to refund consumers by tracing those purchases to specific people. Ultimately, with the change in tariffs retailers will have higher margins, so, will prices come down? Dan cautions, “We have seen the economy in a sort of paralysis, both in the job market and in investment plans, because people didn’t know where these economic policies were going to land. But now we’ve opened up all this uncertainty again.” This candid conversation puts the challenges facing retailers squarely on the table predicting that small businesses will take the brunt of economic uncertainty over the next 12 months. Listen and learn how an economist clears the air on tariff chaos.

Special Guests

Dan Altman, Chief Economist and Bestselling Author, High Yield Economics

Transcript

Tariff Chaos and the Widening Gyre

Mark Cohen — Tue, 24 Feb 2026 05:01:00 +0000

The U.S. Supreme Court’s ruling against Donald Trump’s unilateral imposition of worldwide tariffs should have been a slam dunk. The peculiar delay in the Court’s ruling was allegedly caused by a struggle between ideology and the integrity of the Constitution itself among the justices. Nevertheless, Trump’s “America First” April 2025 “Liberation Day” strategy, emboldened by repeated escalations, changes, and curiously granted exemptions, has now been deemed to be illegal by our highest court.

What does this ruling now mean for the myriads of trade deals this government has allegedly struck with countries around the world? I say “allegedly” because few if any of these agreements have actually been codified. Many, in fact, are based upon future promises of purchases of U.S.-made products and investment in U.S. enterprises that may be specious at best. After the ruling, Trump immediately engaged in a characteristic tirade, accusing the Court of all manner of impropriety and then immediately decreed, despite the Court’s ruling, that he would impose a 10 percent tariff on all U.S. imports across the board. Less than 24 hours later, he amended that decree to 15 percent.

How will retail be affected by the new tariff ruling? And the answer is: The industry will continue to experience more chaos and uncertainty resulting from the recent Supreme Court ruling. A retail CEO walks into their boardroom this week and, without a doubt, asks of his or her executive team, “What now?”

Based on his reaction to the Court’s ruling and his continuing bombastic criticism, it appears that Trump and his advisors presumed that the Supreme Court wouldn’t rein him in nor would the current majority party in Congress, which, by virtue of the U.S. Constitution, holds the only legal authority to impose tariffs. Despite the Court’s decision, he continues to falsely claim that tariffs have not been paid by U.S. consumers, the U.S. economy is booming, inflation is under control, and U.S. manufacturing activity is rising as a result of his tariff-driven actions. Unfortunately, his administration’s own recent statistics refute these claims – something he and his team are unwilling to accept. Underlying all of this, it’s also clear that Trump assumed that the world would bend a knee to his trade demands, something that has not occurred, given evidence of all manner of retaliatory actions taken by a host of trading partners.

So, how does a business leader who may have just breathed a sigh of post-Covid-19 relief in early 2026, now confronted by more confusion from the newly-illegal “Liberation Day” program, proceed? Business executives, both CEO’s and owners of small, medium, large and overlarge enterprises have always faced the vagaries of uncertain futures driven by rising inflation, rising interest rates, ever-changing consumer preferences, competitive challenges, etc. But these issues now all pale in the face of Trump’s ongoing incomprehensible and now illegal trade behavior. Unfortunately, this Supreme Court ruling does nothing to ameliorate the uncertainties that arise from Trump’s ongoing tariff program.

Next Steps

New questions to be resolved:

Will the U.S. Treasury refund the billions of dollars of tariffs that have been collected?
Will consumers and other stakeholders, who have borne an estimated 90 percent of these tariffs, demand and receive some form of recompense?
Will the “deals” Trump struck over the past 10 months remain in place?
Will his declaration of new replacement tariffs even hold?

What a Leader Can Do: A Practical Playbook

The legal authority for these new tariffs is written to allow for a duration of 150 days pending further legislative action. What should retailers do before these five-month actions expire?

Conservatize your sales forecasts and plans.

For businesses currently doing well, be very careful about line-extending current success. Similarly, for businesses currently struggling, be very careful about depending on turnaround assumptions currently in hand. Wherever prices must be increased, be very realistic about the possible negative effects on demand.

Conservatize your gross margin and expense plans as well as your profitability forecasts.

Where you cannot or choose not to raise consumer prices, be very realistic as to what effect that will have on gross margins and then on profitability. The tariff effect has to come from somewhere. If not the supplier or the customer, then where? Operating expenses will be more challenging than they normally are. Everything from service, supply and logistics costs, materials costs, labor and benefits expenses and energy costs will be subject to ongoing and unpredictable price inflation. Yes, the Big Beautiful Tax Bill will provide some offsets, but not nearly enough to cover the uncertainty that I believe businesses will face.

Solidify your relationships with all your stakeholders.

Suppliers: The integrity of your assortments relies upon the relationships you have with your suppliers, all of whom will face the same planning conundrum as you. Focus on your most important vendor partners and manage your relationships with them to a fault.

Customers: Your customers will inevitably continue to exhibit crises of personal liquidity driven by the ongoing inflated prices of goods and services, inflated housing costs and the burden of increasingly expensive child and healthcare. It is really important, now more than ever, to reach out to your most loyal and reliable customers to reassure them that you take their life challenges and continued patronage very seriously. Where you can, advise them in advance of upcoming price increases and changes in customer-facing policies such as shipping costs, returns restrictions and/or changes in hours of operations.

Associates: The viability of a company is always integrally linked to the relationship the company has with its workforce. This is especially true during stressful times, and now certainly fits that bill. Protect the employment of your most valuable team members from the shop floor up to those in corner suites. Unfortunately, this calls for limited hiring if not outright hiring freezes. The best way to avoid necessary reductions in force is to avoid inflating your labor force in the first place. Note, for many businesses, their Covid-19 hiring hangover is just now reconciling itself.

Shareholders: How to manage shareholder expectations is a constant “rock and hard place” issue. If you engage in inappropriate short-term actions to prop up your company’s performance, there will inevitably be a longer-term price paid. This is almost as irrefutable as Isaac Newton’s law of gravity. Having said that, you must protect the performance, if not the solvency, of your enterprise. My advice, admittedly now, from the sidelines, is to level with your shareholders as to the nature and details of the uncertainties you face.

Competition: Business performance, particularly during periods of adversity, is often characterized as a zero-sum game. Winners win by virtue of their ability to take business away from the competition. If ever there was a good time to size up a competitor’s weaknesses and capitalize on them, that time would be now.

Be wary of technology.

Do not view AI-based technology as a panacea during what I believe might be an unprecedented period of turmoil. Yes, increased use of new technology is vital and necessary, but only hand in glove with the use of common sense and good judgment in decision-making. Fear of missing out (FOMO) is something to be examined and managed carefully.

Use the lessons of the recent past.

The 2020-2024 Covid pandemic experience created a textbook of lessons learned for business. In the face of the adversities largely driven by uncertainties that we may be confronted with again, use your company’s past successes and failures as guideposts for the next several years while, hopefully, America regains its footing on the world’s stage.

Anticipate the November 2026 mid-term election

This consequential election may represent an inflection point, as will the 2028 presidential election. But, as it is impossible to foretell conditions and outcomes between now and then, as always, hope for the best but prepare for the worst.

Why We Can’t Quit China

Ross O'Brien — Thu, 15 Jan 2026 05:01:00 +0000

American protectionists had much to celebrate this holiday season. Recent topline trade data suggests that U.S. tariffs on Chinese goods have caused American importers to purchase much less from China than they did before Trump’s second administration launched its global tariff agenda on ‘Liberation Day’ in April, with a particular focus on turning up the heat on an already raging trade war with China. In turn, however, they have yielded little material benefit for U.S. consumers, neither in terms of increasing consumer affordability, redirecting investment towards U.S. innovation and productivity, nor—perhaps the federal government’s most pressing goal—to stop China’s increasing dominance of the world’s supply chains.

In fact, in most cases, tariffs and investment restrictions aimed at China have accelerated the opposite effect, and given China many additional months to solidify its position as everyone else’s most important trading partner. U.S. manufacturing has not significantly replaced Chinese goods for American consumers. The restrictions have caused a diversion of imports to elsewhere from countries in turn, increasingly reliant on Chinese components and machines to produce them.

Will 2026 see a continuation of the volatile tariff swings of 2025 and will the U.S. stop importing from. China? And the answer is: It is unlikely that tariffs will stabilize into something more predictable—not free trade, but a stable managed relationship where some doors close while others remain strategically open, especially when it comes to a pragmatic relationship with China.

Down, But Not Out

American imports from China have indeed plummeted compared to 2024 levels, dropping 29 percent in November alone. The Trump administration’s effective tariff rate on Chinese goods has yo-yoed over the course of the year, and has added more than 40 percent to the cost of those imports, squeezing Chinese manufacturers and forcing American retailers to absorb higher costs or pass them to consumers.

Tariffs may have succeeded in reducing American purchases from China, but they have both failed to reduce overall American trade deficits and have accelerated China’s global market expansion at America’s expense. Chinese exports to Southeast Asia surged nearly 14 percent year-over-year in 2025 (a region that has been a key supplier of consumer goods to America). Chinese exports to Africa jumped 27 percent, and nearly 9 percent to Europe—gains that more than compensated for lost U.S. sales and have allowed China’s global trade surplus to top $1 trillion trade surplus in the first eleven months of 2025—the highest ever recorded.

The tariff policy did achieve what it technically set out to do. Average effective tariff rates on Chinese goods reached 39.2 to 47.5 percent by mid-year. U.S. Census Bureau data reveals American imports from China were $242 billion through September 2025, compared to $439 billion in 2024—roughly a 45 percent decline. Consumer confidence in holiday spending suddenly crashed: Gallup’s November consumer spending poll found gift purchase estimates dropped 23 percent from the month before, to $778, which represents the largest single-month decline the research house has ever recorded, steeper even than during the 2008 financial crisis.

Despite this, the overall U.S.-China trade deficit has not moved much: Through September 2025, the bilateral merchandise trade deficit was $160.5 billion, and is estimated to be around $214 billion for the full year. 2024’s deficit, of $295.5 billion, was higher, but China’s still clearly maintained the upper hand, and American businesses and consumers have paid the price.

Neither did Uncle Sam’s coffers overflow with tariff receipts. The federal government collected over $101 billion in tariff revenue between January and August 2025, but some studies suggested that as much as 25 percent in addition has been uncollected because importers changed purchasing patterns to avoid tariffs.

This reveals the core flaw in tariff-based trade strategy: Global commerce is being redistributed, not rebalanced. Chinese goods never stopped flowing to global markets; they simply took detours around American tariff walls. This strategy has thinned margins for Chinese manufacturers, but it has kept China’s well-oiled export machine running smoothly, and increased its global lead over American producers in the process. Countries once bought American goods now purchase Chinese alternatives at significant discounts.

The U.S. government seems to have shot itself in the foot in its showdown with China. Although America’s door is completely shut to China, signs of selective re-engagement are emerging. Biotech is one such area, and could be a harbinger of how U.S. retail and consumer goods more broadly could work back to a pragmatic trade relationship with the world’s biggest supplier.

China’s Medical Exemption

Despite the U.S. government’s relentless efforts to decouple its economy from China, and the particular success it has enjoyed in chilling cross-border trade and investment in AI, semiconductors and other strategic high-tech, American policy toward China is decidedly not unidirectional. American banks and businesses have found that some avenues are still open to them, particularly in market segments—like rare earth minerals or pharmaceuticals—where American industry has no other choice but to deal with China.

Pharmaceuticals are a particularly thorny area, in part because, like digital technologies, they are seen as strategically sensitive. The U.S. BioSecure Act was first muted in January 2024 by bipartisan lawmakers prohibiting federal agencies and contractors from procuring biotechnology equipment or services from “companies of concern”—primarily state-linked Chinese firms. But to date, it has not been passed, although provisions were incorporated into the National Defense Authorization Act enacted in December 2025.

“There’s a hard firewall between Silicon Valley and China when it comes to AI or semiconductors, but in biotech we’re still able to receive U.S. investment,” says George Lin, Chief Strategy Officer at Hua Medicine, a Hong Kong-listed pharmaceutical company focused on diabetes medications, financed by Arch Ventures and Venrock (the Rockefeller family’s venture capital arm). Hua continues to thrive—it hopes to soon launch a Type 2 diabetes treatment in the U.S., which has seen radical remission rates in its Chinese clinical trials. Lin sees his industry’s challenge for American manufacturers, retailers and consumers that lies at the heart of America’s anti-China stance, and the road back towards a more normal trading relationship. “The fact that attempts like the Bio Secure Act haven’t succeeded shows there’s an understanding—even in Washington—that cutting off this exchange would hurt innovation and patient care in the U.S., and globally.”

China has built extraordinary infrastructure for drug development, of both high quality and low cost. This makes decoupling economically irrational for American pharmaceutical companies, as it would simply slow global drug development without accelerating American innovation. This has led to a controlled re-engagement—and this could foreshadow how consumer retail supply chains could also, slowly, normalize.

The Long Road Back to Normal-ish

The future likely involves sustained differentiation rather than across-the-board decoupling. Sectors deemed strategic for military, intelligence, or advanced manufacturing purposes will face intensifying restrictions: semiconductors, advanced computing, synthetic biology applications, and quantum computing. Tariffs on standard consumer goods and manufacturing will persist, though probably at somewhat lower rates following the October 2025 agreement reducing reciprocal rates from 145 percent to 10 percent. But sectors offering benign applications with genuine human welfare benefits and where American independence proves economically irrational—pharmaceuticals, medical devices, basic research—will continue operating across geopolitical boundaries.

Will 2026 see a continuation of the volatile tariff swings of 2025? It is unlikely that they may eventually stabilize into something more predictable—not free trade, but a stable managed relationship where some doors close while others remain strategically open. China’s record $1 trillion trade surplus will underpin the country’s continued resolve to compete, and it is very unlikely that the rest of the world will have the manufacturing capacity or the political will to converge on protectionist policies on par with America’s.

For U.S. consumers, there will be no immediate relief, as the world collectively fails to quit China. But as the ongoing cross-border collaboration in the pharma sector reveals, U.S. policymakers are capable of balancing national strategy with commercial realities. As economic pressures mount for the average American consumer, perhaps the government will begin to bring the same pragmatism they show in biotech into its broader tariff strategy.

Retail in 2025: Tariffs, Tumult, and the Search for Sanity

Brandon Morgan — Fri, 05 Dec 2025 13:00:00 +0000

2025 may go down as the year retail lost the plot — and tried to rewrite it at the same time.

At a recent Robin Report roundtable, four veteran retail experts — Mark Cohen, Warren Shoulberg, Phil Lempert, and Jasmine Glasheen — unpacked a year shaped by political chaos, economic contradiction, and rapidly shifting consumer behavior. Editor Deborah Patton moderated the session, which revealed a retail industry both remarkably resilient and increasingly fragile.

Here’s what we learned.

Tariffs Are the New COVID

When former President Trump reignited a global trade war in April, many hoped it would be political theater. Instead, it became a seismic shock.

“Tariffs are the new COVID,” declared Warren Shoulberg, comparing the whiplash of constantly changing rules to the darkest days of the pandemic. “Retailers are waiting for the other shoe — or 1,400 shoes — to drop.”

Mark Cohen went further, calling the tariffs an “unwarranted, possibly illegal, and completely chaotic disruption” that could take years to unwind, even if courts eventually strike them down. The move, he warned, was not only economically destabilizing but an echo of the pandemic’s disorientation: “It’s COVID redux, as far as I’m concerned.”

Costco Takes a Stand — Alone

If there was a hero in this story, it was Costco.

The warehouse giant took the unusual step of suing the federal government, claiming the tariffs were illegal. “You have to respect Costco,” said Shoulberg. “They continue to not play by the White House’s rules.”

But that courage underscored a larger disappointment. “Costco is the only big player that has stepped up,” said Cohen. “You would think the automotives, grocers, everyone would speak up — and they haven’t.”

The AI Tipping Point (and Its Cracks)

While 2025 brought supply chain chaos, it also saw the full arrival of artificial intelligence in retail operations — and not always with the promised results.

Walmart led the way with AI-powered efficiency, but not every experiment landed. Jasmine Glasheen pointed to Target’s botched rollout of dynamic pricing, which sparked consumer backlash. “You’re telling customers, ‘We’re going to get every cent we can out of you,’” she said. “Why would anyone trust you?”

Lempert echoed caution, warning that grocers rushing AI into the back office — like Kroger’s failed Mercado fulfillment centers — often underestimated complexity: “Just because we can do something doesn’t mean it’s going to work.”

Still, the panel agreed that well-deployed AI could provide meaningful benefits, from smarter inventory management to personalized shopping lists. The challenge is how — and where — it’s introduced.

The Supermarket Saga: SNAP, RFK Jr., and San Francisco Lawsuits

Nowhere was the volatility of 2025 more palpable than in grocery. Phil Lempert, The Supermarket Guru, laid out the layers: SNAP benefit disruptions, sudden CEO departures, and lawsuits like the one out of San Francisco that targeted ultra-processed foods — which account for 70% of a typical store’s inventory.

“If those products are banned in San Francisco, what happens to the rest of the store?” Lempert asked. “The implications are massive.”

Adding pressure were RFK Jr.’s sweeping health mandates and a climate-driven spike in food costs. “Never in 25 years have supermarkets been this uncertain,” said Lempert.

A GLP-1 Gold Rush Reshapes Food and Fashion

If tariffs and lawsuits drove fear, GLP-1 drugs inspired frenzy. These weight-loss medications, led by brands like Ozempic and Wegovy, triggered a rapid industry response.

Nestlé and ConAgra rolled out high-protein, GLP-friendly products. Kroger launched a private label line. Surcana data suggested GLP users would account for 35% of all food and beverage purchasing by 2030.

Retailers also braced for downstream effects in apparel and health categories. “I never expected the traction to move this quickly,” Lempert said. And with pill versions pending FDA approval, adoption is likely to accelerate.

Gen Z’s Sensory Overload and the Retail Backlash

But not all disruption is policy-driven.

Jasmine Glasheen described younger shoppers as “overstimulated” by in-store experiences. “78% of young consumers say they’re overstimulated,” she noted, praising Walmart’s low-sensory shopping windows while critiquing Urban Outfitters for cranking up the visual noise.

Her broader thesis? Retail is overdue for a “return to calm.”

“Low-sensory in-person and online experiences are the future,” she said. “Retailers need to get back to the humanity of shopping.”

The New Class Divide in Shopping

The conversation inevitably turned to inequality — and the hollowing out of the middle class.

“Retailers are feeling the effects of economic asymmetry,” said Patton, citing data showing the top 10% of households account for 50% of retail spending.

Consumers are gravitating toward two extremes: $22 smoothies at Erewhon on one end, private-label goods at Aldi on the other. “We’ve lost the middle,” said Shoulberg. “And that’s one of the great tragedies.”

The panel noted a bifurcation in retail strategy. Some brands chase premium experiences (see: Whole Foods’ “Daily Shop” format), while others double down on off-price and discount formats.

The Retail Crime Wave and Associate Protection

If 2025 brought automation to the back office, it brought something uglier to the front of house: escalating violence and theft.

Retail crime surged — but few arrests followed. “Only one in 48 reported shoplifting incidents results in arrest,” Glasheen noted. “And most aren’t even reported.”

The burden has fallen unfairly on associates. “You can’t expect store associates to be your loss prevention team,” said Cohen. Lempert pointed to stores like Hy-Vee, which posted armed guards to deter crime. The question now is how to balance safety with welcoming environments, especially for next-gen consumers already dealing with mental health strain.

What’s Ahead in 2026?

Looking ahead to 2026, the retail industry faces a complex mix of economic headwinds and shifting consumer dynamics. Several panelists anticipate a significant downturn, with Mark Cohen forecasting a full-blown recession by Q3, while Warren Shoulberg warns the true cost of tariffs will come due midyear. At the same time, Jasmine Glasheen predicts a continued pivot toward lifestyle branding, as retailers seek emotional resonance with increasingly fragmented audiences. Climate change will also take center stage, particularly in grocery, where Phil Lempert expects persistent food inflation driven not just by policy but by environmental strain. In short, 2026 is shaping up to be a test of resilience — where adaptability, empathy, and operational discipline will define who thrives and who falters.

How Do You Explain the Recent Surge in Retail Sales?

Warren Shoulberg — Wed, 17 Sep 2025 04:01:00 +0000

Maybe you could call it a false positive. Over the past few weeks, we’ve seen a fairly steady parade of surprisingly positive numbers from all sorts of big public retailing companies. Many have been on the lower rungs of the economic pyramid, a territory that was projected to be suffering more than the retail field in general. Some were recent problem children of the industry; retailers that had been struggling to remake themselves in the face of the never-ending shifts in the buying psyches of the American consumer. And some were industry stalwarts that seem to have endless supplies of black ink when it comes to financial reporting.

Retail, inevitably a zero-sum game, has had more than its fair share of players who are on the borderline. Some, like Rite Aid and At Home, have ended up in bankruptcy, while Walgreens was acquired and taken private by private equity giant Sycamore. Macy’s is perhaps the most talked-about struggling retailer, but in its most recent quarter, it beat analyst forecasts.

Fake News?

So, are we to deduce that maybe the doom-and-gloom forecasts that have been circulating recently are way off base? Are the economic policies of the current U.S. administration really working and are things getting better? Could we be entering a time of milk and honey? The Golden Age?

Nah. As much as it would be nice to confirm that the people running our country actually know what they’re doing, there’s a much more realistic explanation for all this apparent positivity: This is the calm before the tariff storm. It’s the period when American consumers — terrified up to their credit limits — know that if they don’t pull their purchasing triggers right here and right now, they are going to get nailed this fall and into the fourth quarter when the full effects of the tariffs truly hit. Panic buying is as good a name for it as anything. There’s no other way to explain it. For an in-depth look at the unintended consequences of the tariffs, check out my TRR colleague Sarah Holbrook’s report that ran this week.

The Lower End

The soothsayers have been thinking that the bottom of the marketplace was going to get slammed the worst in any coming economic maelstrom. Sure, there would be some trading down, but it would be more than cancelled out by falloffs in buying activity by consumers most economically pressed. For these shoppers, it wouldn’t be a matter of trying to find the best prices; it would be that no price is low enough, and I’m not buying anything.

But if this prediction is true, it sure isn’t happening yet. We saw some of the big retailers that play the price game truly shine recently. Of course, leading the pack is Walmart, the biggest retailer on the planet, which has been on a spectacular hot streak recently. Its second-quarter results issued in August were up 4.6 percent in comp store sales for its U.S. operations, with its average ticket up 3.1 percent, which is pretty impressive considering its price points.

A lot of Walmart’s gains are market share gains as Target continues to struggle and the Boys from Bentonville get better and better at ecommerce. But also, Walmart has said it is bringing in more affluent shoppers, and that can only mean those consumers are trading down and sacrificing their normal retail haunts. No doubt they are smart enough to see what’s coming.

Down the highway, Dollar General had an even better quarter, with sales up 5.1 percent. Comps were lower than Walmart, up 2.8 percent, but there was a 1.5 percent increase in customer traffic and a 1.2 percent boost in average transaction purchase.

There were other wins on the lower steps of the retail pyramid, but it’s the increase in transaction size that, more than anything says consumers are bulking up in anticipation of the tariffs hitting the fan.

Turnarounds Turning Around

Retail, inevitably a zero-sum game, has had more than its fair share of players who are on the borderline. Some, like Rite Aid and At Home, have ended up in bankruptcy, while Walgreens was acquired and taken private by private equity giant Sycamore. Macy’s is perhaps the most talked about struggling retailer, but in its most recent quarter, it beat analyst forecasts, and its core group of GoForward locations showed positive sales gains. Overall revenues for the big department store player did decline, but this ended up being the most positive set of numbers it has issued in quite some time. Again, this is at least partially reflective of a better strategy that emphasizes enhanced merchandising tactics and the ongoing deemphasis of marginal stores. But you have to reason that consumers also reacted to the tariff timing, thinking they better get their fix of Macy’s national and private brand goods before prices go up.

Perhaps Macy’s closest competitor these days, Kohl’s, didn’t have quite as good a quarter as its top and bottom lines remain mired in soft territory. But the retailer beat most analyst projections and, as such, its stock got a nice boost this quarter. There’s still so much more work to be done here — a permanent CEO for starters — but the old rising tide theory certainly helped Kohl’s this time around.

The Usual Suspects

If you have to point to any retail sector that seems to keep outperforming everyone else, it’s, of course, off-price. And within that sector, it’s TJX. Its most recent quarter continued its hot run, as well as continuing to beat analyst forecasts. Ross and Burlington also had solid quarters, and while this proves the consumer continues to respond to the off-price model, it also confirms that shoppers believe these players are somehow immune to tariffs and have the prices to prove it. Of course, this is not exactly true, but often perception beats reality…in fact, it usually does.

Watch for off-pricers to continue to beat the rest of the field, picking up more market share as tariffs really start to impact the cost of goods across the entire retail spectrum. TJX and the rest will get hit too — despite their claims otherwise — but they will be better at hiding it in their cavernous, 16-turns-a-year assortments.

Coming Soon to a Store Near You

We also saw positive results across a number of retail sectors, including mid-priced fashion chains, home improvement big boxes and home and furniture retailers. But anyone paying attention and ignoring the partisan rhetoric can see that the first signs of the damage tariffs are doing to the American economy are starting to pile up now. This is only going to get more so. That’s why you shouldn’t be surprised to see the retail numbers that start to come out in October and early November telling a very different story from the ones we’ve just seen. Rather than across-the-board success stories, the winners will be more isolated and the list of losers longer. In the meantime, anyone in the retail business should savor what we’ve just seen. But don’t get used to it, it won’t last.

Shipping Logistics at a Crossroads

Brian Delp — Thu, 14 Aug 2025 04:01:00 +0000

Retail’s logistics playbook is being rewritten. Again. Union Pacific’s proposed $85 billion acquisition of Norfolk Southern may seem like a rail-specific development, but it’s part of a larger pattern industry leaders can’t afford to ignore. It is yet another major adaptation for a supply-chain system already under pressure. If approved, the deal would create the first coast-to-coast freight railroad in the United States, reshaping how goods move across the country. But the implications go beyond rail.

It joins a crowded field of disruptors: labor strikes, reshoring, trade wars, Red Sea rerouting, and a logistics system still recalibrating from a pandemic-era whiplash. Retailers have spent the past few years rethinking how and where their products are made, stored, and shipped. This new deal is one more variable to consider. The ground is still shifting beneath retailers, and the companies that treat the transcontinental link as part of a broader logistics network, not an isolated event, will be better positioned to adapt.

Retailers with rail-heavy networks may need to reevaluate their long-term exposure. That doesn’t mean abandoning rail altogether, but it does require stress-testing the network for vulnerabilities and building in alternative routes and modes where possible.

Freight Network by the Numbers

For all the buzz about automation, air cargo, and autonomous trucks, the majority of retail goods in the U.S. still move the old-fashioned way by land: on railcars, trucks, and in containers stitched together in a national freight grid. That grid, however, is under increasing strain from volatility, consolidation, and conflicting priorities. Retailers aren’t relying solely on one mode anymore: they’re blending them, often dynamically, with varying success.

Rail moved nearly 27 percent of U.S. freight by ton-miles in 2023, making it indispensable for long-haul and bulk shipping. Yet its inflexibility with fixed routes, slower speeds, and limited digital visibility can make it a liability for time-sensitive retail inventory. Trucking, by contrast, accounted for around 41 percent of ton-miles in the same year, offering unmatched flexibility. But that flexibility comes with price swings tied to fuel, labor shortages, and regulatory shifts. These pressures have only intensified post-Covid.

What once felt stable is now part of an uncertainty. Cracks are showing across these networks: chokepoints at terminals, labor uncertainty, mismatched investment in infrastructure, and significant rate volatility have exposed vulnerabilities. The next phase of supply chain planning will depend on how business leaders adapt to a freight landscape that keeps evolving.

Tariffs, Trade, and New Logistics Math

Retailers are no longer planning supply chains around capacity and cost alone. Trade policy and tariffs now factor directly into routing decisions and network design. Tariff codes and customs classifications were once treated as back-office compliance matters. That’s no longer the case. In an era of shifting sourcing strategies and unpredictable trade policy, tariffs have become a frontline variable in supply chain planning, and freight networks are now expected to adapt in kind.

The proposed merger between Union Pacific and Norfolk Southern enters this landscape at a moment when many companies are already reconfiguring how and where they move goods. While tariffs on Chinese imports remain in effect, recent executive action added sweeping reciprocal duties: 35 percent on Canadian goods, 25 percent on Indian imports, and rates up to 50 percent on Brazilian, Taiwanese, and EU-bound products. These actions are significantly increasing landed cost risk for apparel, electronics, auto components, and other imported goods.

Brands are responding by diversifying sourcing, some nearshoring in Mexico and Central America, others toward Southeast Asia or India. As a result, inland intermodal routes, where rail plays a central role, are becoming critical to controlling customs entry points and duty timing, not just transit cost. But here’s the catch: Fewer rail operators could mean fewer routing options. That has consequences not just for transit times, but for tariff exposure. Retailers using bonded warehouses, free trade zones, or port-specific tariff strategies depend on tight control over where and when goods enter customs clearance. Slight delays or misrouting can shift tariff liabilities significantly, especially for seasonal or fast-moving goods.

Policy uncertainty adds another layer. As trade enforcement becomes more active and exemptions or reclassifications evolve, the friction between policy and operations becomes harder to ignore. Logistics isn’t just about moving goods anymore; it’s about managing regulatory risk, optimizing cost structures, and responding quickly when trade policy shifts mid-year. For executives leading sourcing, merchandising, or global operations, the key question isn’t just how tariffs affect product margins. It’s how freight strategy either supports or constrains their ability to respond.

How the Merger Could Reshape Retail Supply Chains

Past rail mergers, such as BNSF, Union Pacific, and Conrail, promised scale and efficiency. In practice, they often delivered short-term disruption and long-term bargaining power shifts. For retail leaders, this one raises familiar concerns: fewer partners to negotiate with, less pricing visibility, and more pressure on already-fragile timelines. In short, what’s at risk for retail leaders is cost predictability, speed, leverage, and flexibility. Even if rail isn’t your primary mode, the effects will ripple across contracts, inventory planning, and freight strategy.

For retailers, brands, and importers, the potential impacts of the merger span across six key areas:

Lead Times: Theoretically, a unified coast-to-coast network could reduce dwell times at major interchanges like Chicago and Memphis. But in practice, rail integrations are slow and bumpy. Past mergers have led to short-term delays that disrupted inventory flow for quarters, not weeks.
Costs: With fewer Class I carriers left, shippers may face less bargaining power and more exposure to rate increases. History shows that while rail carriers typically capture cost synergies, those savings rarely trickle down to the customers.
Labor Risks: Every major rail merger has triggered workforce reductions and scheduling overhauls leading to union resistance and, in some cases, strike threats. This remains a high-risk area for retailers with narrow delivery windows or seasonal flows.
Infrastructure Alignment: Merging two networks requires more than routing maps—it means aligning capital investments, yard operations, and intermodal terminals. Retailers relying on time-sensitive replenishment need clarity on how these assets will evolve, and whether upgrades will follow promises.
Sustainability Implications: A larger, more efficient rail network could reduce carbon output per shipment. But without investment in cleaner engines or electrified lines, ESG benefits remain theoretical. Retailers seeking measurable emissions reductions will need more than a marketing slide.
Operational Complexity: Integration often introduces more layers of communication and decision-making, especially during the transition. For importers managing port-to-shelf movement, the risk isn’t just delays, it’s missed signals, lost containers, and finger-pointing across disconnected systems.

The Surface Transportation Board (STB), chaired currently by Patrick Fuchs, an appointee of the Trump administration, will ultimately decide whether the merger serves the public good. While the board has signaled openness to consolidation in the past, for businesses that depend on freight daily, the more pressing question is whether this merger supports the speed, flexibility, and transparency modern supply chains require.

Strategic Signals Retail Leaders Should Track

Whether or not the merger clears regulatory hurdles, its announcement alone signals a shift in how freight will be negotiated, priced, and prioritized in the coming years. For retailers, brands, and importers, the key is to be proactive.

As rail networks consolidate, the number of partners at the negotiating table shrinks. That changes the balance of power, particularly for mid-sized and seasonal shippers who may have relied on regional carriers or competitive rate structures. The question isn’t just how to move goods, but how to maintain leverage in a market where options narrow and switching costs grow.

Retailers with rail-heavy networks may need to reevaluate their long-term exposure. That doesn’t mean abandoning rail altogether, but it does require stress-testing the network for vulnerabilities and building in alternative routes and modes where possible.

There’s also a broader question of engagement. Mergers of this scale are subject to regulatory review and public comment. The Surface Transportation Board may be the one issuing rulings, but shippers have the opportunity, through industry groups, public filings, and direct outreach, to make their supply chain priorities part of the review process. If you’re not at the table in STB reviews or trade coalitions, you’re reacting, not shaping.

For executives overseeing omnichannel growth, merchandising, or global sourcing, the logistics function is no longer just a cost center. It’s a barometer of risk. The most resilient organizations will be the ones watching these signals closely:

Freight market consolidation
Tariff and trade friction
Infrastructure gaps and chokepoints
Labor volatility
The tightening link between ESG reporting and transport strategy

The freight system is shifting. Logistics planning is no longer just an operational task; it’s part of long-term business strategy. Companies that treat it accordingly will be better equipped to manage disruption and adjust with intention rather than urgency.

Tracking What’s Ahead

The Union Pacific–Norfolk Southern merger may take years to secure regulatory approval, but the signal is immediate: logistics is now a leading indicator of retail health. Supply chain choices shape everything from margin protection to product availability. For executive teams, the mandate is clear: treat freight not just as a function to manage, but as a strategic lens for navigating uncertainty.

For retailers, brands, and importers, the timeline is less important than the trajectory. Freight consolidation is accelerating. The implications of this deal won’t play out overnight. But they will surface through changing rate structures, shifting transit times, and evolving expectations around service and sustainability.

The decisions made now, around network design, partner diversification, and policy engagement, will determine how well companies are positioned for what comes next. Supply chain strategies can’t be static. This merger is one more reminder that logistics is no longer just a means to an end. Freight planning requires its own strategic plan.

The Best (& Most Outrageous) Tariff Tactics

Warren Shoulberg — Tue, 08 Jul 2025 04:01:00 +0000

For many, it’s worse than Covid. Worse than the 2008-2009 Great Recession. And much worse than the 9/11 terrorist attacks. Simply, it’s the biggest threat to their businesses in their lifetimes and the ways they are trying to navigate through it are both predictable and outrageous. But hey, whatever it takes.

They say necessity is the mother of invention, but that goes for calamity too. Bloomberg recently reported that Robert Keely, who runs a guitar pedal company called Keely Electronics, was hit with an $11,000 tariff bill for a load of imported merchandise. With no other options, he cashed in 1.83 million American Express rewards points to pay for it.

Tariff Tension

Tariffs — something that showed up during the first Trump administration but had basically receded over the Biden years — have come roaring back, driving most of us to our high school economics textbooks (more likely ChatGPT) to try to understand exactly what is going on. And whatever is happening may depend on what day you’re reading this as the situation is fluid. That’s to say operating in a Trumpian way where the laws of physics (and logic) are nonexistent. Proclamations come and go as often as the deadlines associated with them. Anytime you think you understand the rules, they change…and you no longer do. Frustrated doesn’t begin to explain how most business leaders feel.

So, we now have a tariffwashing environment. Car companies (doesn’t matter if they are stalwart American brands or those from Asia) run TV commercials proclaiming they are the most patriotic brand in the land, with tariff-free dealer lots just waiting for you. Other brands proudly (defensively?) shout their domestic production or exemption from tariffs due to the small print in some existing trade agreements. For others, the strategies and tactics run the gamut from the obvious to the sublime and from intelligent to…well, let’s just say unintelligible. Here are some we can’t ignore.

Buy Now

A new survey from CouponFollow reports that over a third (36 percent) of Americans have made a recent purchase specifically to avoid price hikes while one in five have made a larger or impulsive purchase out of tariff fears.

When tariff talk first started at the beginning of this Trump presidency, many companies that import goods from about-to-be-slammed countries loaded up on their inventories, figuring whatever carrying costs associated with that would far outweigh the anticipated extra duties. They were mostly right. Rooms to Go, a furniture retailer — one of the most exposed categories and suffering its own non-tariff-related ills associated with a dismal housing market — ran “Beat the Tariffs” TV commercials. “Don’t Wait. Buy it Now,” the spot blared, emphasizing “Our prices are low, our prices are locked.”
Dollar Tree, in the meantime, is taking a less subtle approach, affixing a red sticker to any merchandise on its shelves that will get a price increase in the near future. In fact, signage with the higher prices is already in place but shoppers are being advised to buy now before the increases take effect. Those prices may only go from $1.25 to $1.50 but in the world of dollar shoppers, that’s a lot.
At recent home furnishings trade shows in High Point and Dallas, a number of companies played similar cards at the wholesale level. Kalalou, a gift and home décor supplier, had a big banner outside its showroom, proclaiming “We’ve got your Back!” promising “no surcharges, no price increases, no worries.” Another plastered its front showroom window with “We are proud to say we have healthy inventory levels.” Smart, proud, or tariffwashing, it was effective.

Made Here

The number of brands telling their Made-in-the-USA stories seems to be multiplying at an exponential pace to the extent that makes one wonder whether we really have this many companies domestically producing products.

Hubbardton Forge, a Vermont-based lamp producer known for its handcrafted products, prominently featured a sign outside its Dallas showroom telling marketgoers, “Made-to-Order in Vermont. 3-4 Weeks Guaranteed.” And if that weren’t enough it pulled out all the jingoistic language with another sign complete with a waving American flag and the wording “Reliable. American. Workers.” complete with extra punctuation for emphasis.
Back in High Point, marketgoers were greeted with an oversized banner on the side of one showroom building for Moss Home, complete with the ubiquitous Stars and Stripes and big, bold wording “MADE IN THE USA.” More subtle but along the same lines, first-time exhibitor Painted Paper had the same message for its wallpaper products.

Sourcing Geography

Playing the tariff game as a strategy is particularly tricky as tariffs seem to come and go from places no one could have ever imagined. The fact that some of the highest levies are on what had been considered safe alternatives like Canada and Mexico makes this treacherous territory. Even the first round of early-April tariffs slammed countries like India and Vietnam that seemed reasonable sourcing alternatives. Depending on where all this eventually shakes out — assuming it ever actually does — perhaps the only places on the planet that will be tariff-free are Russia, North Korea, and Iran…not exactly great trading partners or democracies these days.

Under a Trump 1.0 trade agreement some products from Canada and Mexico, as well as Central America, continue to be exempt from the worst of what is going on now. It’s a case-by-case thing but may be worth the effort of looking into for some businesses.

Others are turning to Europe … again. For the past few decades, most imports from the continent were simply uncompetitive in price with their Asian counterparts, the quality being not enough of a differentiator. Between tariffs and currency fluctuations that has changed. Some products such as textiles, glassware, footwear and selected apparel categories are all better options from European suppliers.

And in the worst case, brands in the EU could skip the U.S. completely, doubling down on their European businesses.

Cerebral Retail

Then there’s the more intellectual (and common sense) approach to tariffs that advocates retailers get back to the basics of their business and learn how to work around all the grief tariffs are causing. Dr. Brent Ridge, co-founder of the niche personal care brand Beekman 1802, recently wrote in an industry trade magazine that retailers need to embrace “G.O.A.T. Wisdom,” a play on the acronym Greatest of All Time. In his case, it is tied to the fact that most of his company’s lotions and potions are made of goat’s milk. “I realized that the threat or continuation of tariffs just emphasizes how important basic business fundamentals are to retail success,” he wrote, emphasizing basics like a better store “curation” that creates a more distinctive merchandise mix and “storytelling” to create a value story even if prices have increased.

He also asks the question every small businessperson must pose just about every day: “Have you lost the passion for the business you created? Is this because you are no longer doing the part of the job that you enjoyed the most? Try to go back to that. When our business has been challenged in the past (and all businesses go through challenging times!), we try to get back to our passion. Leaning into that passion is what makes you resilient.”

And Then There’s This

They say necessity is the mother of invention, but that goes for calamity too. Bloomberg recently reported that Robert Keely, who runs a guitar pedal company called Keely Electronics, was hit with an $11,000 tariff bill for a load of imported merchandise. With no other options, he cashed in 1.83 million American Express rewards points to pay for it. “It’s like a needle holding back a crack in the dam,” he said, adding it was the only “play” he had left to save his business.

Yet, even as many businesses resort to unprecedented measures to battle tariff terror, that CouponFollow study found that 64 percent of small business owners haven’t made any changes in their operations to deal with this. It found that about a third of small business owners said they didn’t feel prepared to tell their customers why prices are going up and worse, nearly two-thirds expect a negative impact on their companies because of tariffs.

Clearly, some businesspeople are further ahead on this than others. A musical supply vendor, Julie Robbins, chief executive officer of EarthQuaker Devices, seemed to grasp the gravity of the situation in no uncertain terms, telling Bloomberg, “I don’t think any of us are willing to go down without a fight. And I think we all view this as, you know, a threat to our survival.”

The High Cost of Tariffs for Vietnam

Ross O'Brien — Wed, 18 Jun 2025 04:01:00 +0000

Less than a month remains before the 90-day reprieve on Trump administration’s ‘Liberation Day’ reciprocal tariffs expire and the U.S. starts levying stiff duties on imports from nearly every country in the world. While Trump continues to lob the occasional bombshell—such as doubling steel and aluminum tariffs on June 3—America’s trading partners (and many American traders themselves) in recent weeks have grown more confident that the federal government’s interest in tariffs may be waning.

Another complication for Vietnam is that it is not particularly adept at aligning its interests with those of its trading partners. Despite being extremely dependent on exports and FDI for growth, Vietnam is inconveniently prickly and more than occasionally paranoid in its international relationships.

Proactive Vietnam

Vietnam, however, is taking no chances. The country has taken many steps to ingratiate itself with U.S. negotiators, such as preemptive announcements to reduce tariffs on U.S. imports and pledges to purchase more from America, including buying more liquified natural gas (LNG), cars and planes, and even Elon Musk’s StarLink satellite internet service. The Vietnamese government has also pushed through approvals clearing the way for the Trump family to build a $1.5 billion golf resort outside of Hanoi and a skyscraper in Ho Chin Minh City, even though it seemingly flouts its own foreign investment laws.

The stakes are high: Vietnam’s booming economy and incredibly robust domestic retail sector have been fuelled by fast-rising wages provided by its growing export-oriented contract manufacturing sector. Exports to the U.S. have roughly doubled in value over the last five years, reaching nearly $137 billion in 2024. America accounts for nearly a third of Vietnam’s total exports, largely consumer electronics, apparel, footwear, and furniture.

Smartphone makers, mostly South Korean and Chinese, produced more than 192 million units last year in Vietnamese factories, more than 15 percent of the world’s output. Vietnam has over 2,200 footwear manufacturing businesses, supplying 10 percent of the world’s shoes, making it the second-largest producer—and over 40 percent of that output goes to North America. Vietnam overtook China two years ago as the largest furniture supplier to the U.S., with $9.7 billion in imports in 2024.

America’s Favorite ‘Plus One’ Is Nonplussed

Vietnam’s rapid export growth is in large part because it has become U.S. retailers’ preferred “China Plus One” sourcing destination. For many years American buyers have diversified their supplier base away from China to reduce overdependence on a country that has become both more expensive and a political liability. Ironically, Vietnam has been one of the most attractive ‘plus one’ alternatives because its economy is the most China-like: tightly managed by a centralized government that has been keen to use its large, well-educated and relatively cost-effective workforce to push exports and propel development. As a result, foreign manufacturers have flocked to Vietnam, conservatively pouring between $150 and $200 billion into factories since 1990.

Now in a further ironic twist of fate, Vietnam stands to be punished by its biggest customer for being so successful as a supplier. In Donald Trump’s reductionist (and economically inaccurate) tariff calculus, any country which exports more to the U.S. than it imports is ‘cheating’ America, and needs to be taxed in proportion to the scale of their cheating. This is bad news for Vietnam which had a trade deficit with the U.S. of US$123.5 billion in 2024; only China’s and Mexico’s are higher.

By Trump’s calculations, this works out to a whopping 46 percent reciprocal tariff looming over Vietnam’s future exports. This is putting extreme pressure on the country’s policymakers to take on more imports to balance the trade deficit scales and find other ways to convince the U.S. to give it a break. But these tariffs will also put pressure on the U.S. companies that have become increasingly reliant on Vietnam to keep their costs—and their China risk—down.

Playing the China Card, Carefully

In addition to golf courses and skyscrapers, Vietnam is also trying to show the Trump administration the value of its friendship by helping out in its long-running trade war with China. Vietnam has pledged to crack down on ‘transshipment fraud’ of Chinese goods rerouted through Vietnam to evade U.S. tariffs. The port of Hai Phong has long been suspected of serving as a transshipment hub for Chinese exports, which is only a few hours’ drive from the 800-mile-long border the two countries share.

However, Vietnam cannot afford to be too aggressive in helping the U.S. contain China. Similar to South Korea and many other Asian producers, Vietnam has a vital, interdependent and uneasy trading relationship with China. China is a primary investor in Vietnam’s manufacturing sector, and a source of most of the chemicals, textiles and digital components used in the goods Vietnam uses to assemble products shipped to the U.S. China’s President Xi Jinping visited Vietnam in April (his second trip in less than two years) as part of his post-Liberation Day charm offensive tour to Southeast Asia which included stops in Malaysia and Cambodia, to show China’s continued support for its important manufacturing and trade partners in the region. All this complicates Vietnam’s ability to make a deal with the U.S.

Ambivalent Global Citizen

Another complication for Vietnam is that it has trouble aligning its interests with those of the rest of the world. Despite being extremely dependent on exports and FDI for growth, Vietnam is inconveniently prickly and more than occasionally paranoid in its international relationships.

Vietnam continues to be one of the world’s most restrictive internet economies: Freedom House ranked the country the 5^th lowest on its global Internet Freedom Index. On Christmas day last year, the government enacted Decree 147, a severely restrictive new internet usage law that limits the amount of time citizens can play online games and requires foreign social media companies to host their user data in the country and provide it to authorities, on demand. Vietnam’s iron grip over internet access certainly makes the StarLink agreement look oddly permissive. Vietnam is also near the bottom (173 out of 180 countries) in the Reporters Without Borders Press Freedom Index. A recent issue of The Economist which featured a cover story on Vietnam and its leader To Lam was banned in Vietnam, even though it was only marginally critical of To and his government’s economic reform efforts.

Digital Isolationist

These restrictions make Vietnam look more like the hermit kingdom of North Korea instead of globalist Singapore. This may explain the lack of nuance in Vietnam’s international engagement strategies, such as the brash offers of golf courses and satellite deals to curry favor with America. But more importantly for the future of its economy, throttling internet access limits the flow of ideas and innovation in and out of Vietnam. This in turn will stymie many higher-value industry sectors that the government hopes will eventually transform its economy, such as its surging ecommerce industry, thought to have generated $36 billion in value last year.

Despite, or rather because of, the great success of Vietnam’s export-fuelled growth, it is facing the same ‘middle-income trap’ problem as China and South Korea (Vietnam’s de facto economic role models). As incomes continue to rise—like many export-driven nations, wages in Vietnam have more than doubled over the last dozen years—the country is becoming a less attractive place to assemble finished goods. This means an economic upgrade is needed.

Lack of Champions

Most of Vietnam’s export-driven peers have tried to build up national champions that can both serve the growing needs of their local consumers and eventually begin to start to export products and services to move up the value chain. But Vietnam is still relatively stuck, with its domestic retail economy swamped with international brands. While there are some rising domestic stars, there are few national champions outside of a few FMCG or agribusiness brands.

Vietnam still lacks high-end manufacturing design capabilities (as China and South Korea have), a ‘self-sustaining’ domestic retail economy (like China), or increasingly world-class brands (like South Korea). This means that even if Trump’s tariffs go through (which looks increasingly unlikely in these TACO times), Vietnam will struggle to sustain its growth without a significant shift in its economy. Its domestic consumer markets will also suffer and falter if Vietnam fails to find a path towards higher-value exports, and starts to loosen its iron grip over its digital economy.

In both tariff-on and tariff-off (or -delayed) scenarios, Vietnam’s future also presents risks for U.S. companies. For decades, Vietnam has been a willing and able partner for U.S. brands looking for a substitute for China’s efficient and cost-effective production—like Nike, which produced more than half of its sports shoes and a quarter of its clothing in Vietnamese factories last year.

Tariffs will erode Vietnam’s cost advantages for Nike and other brands nearly instantly. Other footwear and apparel production centers in Southeast Asia will share Vietnam’s fate (Cambodia and Laos are facing similar tariff levels), which will make it difficult for brands to shift manufacturing to avoid these costs. If tariffs do not come to pass, however, Vietnam will still also lose its cost advantage, albeit more slowly, to good old-fashioned wage increases as it continues its rapid ascent to becoming a middle-income country.

In either case, this is a clarion call for Vietnam, its manufacturing partners in the U.S., and elsewhere to take on higher-value-added links in the production chain. Despite concerns about China and its competence in managing increasingly dispersed global supply chains, U.S. brands and others will have work with Vietnamese manufacturers to become more China-like. This means increasing investments in process automation and design in Vietnam while finding ways to export Vietnamese assembly capabilities to other, cheaper countries. In some ways, the threat of tariffs could serve as a catalyst for one of America’s most faithful trade partners to accelerate its own much-needed economic transformation.

Korea and Japan Play Beat the Tariff Clock

Ross O'Brien — Thu, 05 Jun 2025 04:01:00 +0000

Korea and Japan are arguably the U.S.’ closest Asian allies, with mutual defense and cooperation relationships spanning decades. At $228 billion and $150 billion respectively, the pair are also America’s fourth and sixth largest trading partners. So, when the entire world was blindsided by the Trump administration’s punitive tariffs levied on April 2, America’s two firmest friends in Asia felt uniquely betrayed.

Since the Liberation Day announcement, however, the U.S. government has made a dozen or more major changes to its tariff policies: increasing some, suspending others, and announcing many exemptions and adjustments for multiple countries and products. Adding to the global trade chaos have been attempts by competing federal courts to alternatively suspend the tariffs (as the U.S. Court of International Trade rules on 28 May) and uphold them (as the District Court for the District of Columbia did a day later).

Given the growing number of loopholes that America has already created in its numerous tariff negotiations, it is likely that Korea will work out favorable terms when it gets to the table and the Trump administration will make many more concessions to others from which Korea Inc. may also benefit.

Tariff Gamesmanship

As of this writing, the 90-day reprieve on the reciprocal tariffs for Korea and Japan (which currently stand at an additional 25 percent for most goods) will expire on 8 July. Both countries remain in discussions to reduce (and hopefully remove) these tariffs, especially for strategic exports like cars, semiconductors and pharmaceuticals. Both countries appear willing to make important trade concessions to achieve these goals; Korea in particular is keen to support its export sectors and demonstrates a willingness to play by the new U.S. rules.

Yet while some of America’s other large trading partners—the U.K., and even its number one rival China—have rushed to ink their trade deals, Japan and Korea seem content to take their time. This is in part because of complex regional trade relations (in Korea’s case) or domestic politics (in Japan). But the main reason these two countries are fine with running out the tariff clock is the hope that the Trump administration will continue to backpedal, or the ongoing legal wrangling will finally overturn the tariff rulings, or at least continue to delay their implementation. Added to this is the hope that Korean and Japanese investments in America’s manufacturing sector will be recognized by the administration as more valuable to the U.S. economy than the revenue tariffs will generate.

Korea: Between the U.S., and a Harder Place

Korea’s government is managing a careful balancing act in its trade relationship with the U.S. It is trying to rebalance trade levels with America, and has even started to crack down on attempts by Chinese exporters to use Korea as a transit hub to avoid U.S. export bans and tariffs. At the same time, Korea is also preparing for the worst, increasing government support of key export industries, like pharmaceuticals and semiconductors, threatened by higher tariffs from its largest trading partner.

Underpinning this this is the fact that the US market has become increasingly important for such high-growth Korean export sectors as health and beauty, says Hyein Yoon, founder and CEO of Korean social media marketing consultancy HY Marketing. “The U.S. is now Korea’s biggest cosmetics export market globally,” she adds. Yoon points to recent U.S. International Trade Commission (USITC) estimates which put American K-beauty sales at over $1.7 billion in 2024, some 40 percent higher than exports to France, Korea’s second-largest cosmetic market. Yoon feels Korean beauty brands are particularly exposed as tariffs loom, because although “heritage is important” to K-beauty brands’ reputation—and thus overseas sales—the actual domestic market is becoming less so. “Many K-beauty brands don’t even execute their marketing brands in Korea first—they need to reach customers in the U.S. and other international markets,” she explains.

Korean consumers have not begun to purposely avoid American products and brands, as have Canadians, Europeans and others in growing numbers of anti-tariff boycotts. This is partly because, as Yoon explains, Korean affinity for American brands runs deep, and many have effectively localized: “McDonald’s now sells sweet potato fries—in many ways they are considered a Korean brand!” However, she has noticed an increase in discussions on social media sites and in discussion groups on Korean ecommerce platforms “on how to find local substitutes for U.S. products like peanut butter, just in case prices start going up.” Increased tariffs on Korean exports to the U.S. raise concern that Korea might reciprocate, heightening concerns among price-sensitive shoppers.

Trade with China presents another challenge for Korea’s ability to achieve an equitable trade deal with the U.S. China is another important K-culture export market; after the U.S. and France, China is the third-largest K-beauty market, with annual sales estimated at $1.2 billion. But some of Korea’s exports to China could become collateral damage in the years-long U.S.-China trade war.

In particular, Korean technology firms are caught in the crossfire in a tech trade war in which America seeks to curb Chinese access to cutting-edge technology markets and reduce Chinese digital exports. Many Korean companies are key suppliers to Huawei and other Chinese tech giants, such as Samsung Electronics, which is becoming a world leader in HBM (or High Bandwidth Memory chips) which are used in AI and supercomputing applications and are key target of U.S. embargos to China. China accounted for roughly a third of Samsung’s fast-growing semiconductor sales last year, and indirect suppliers and distributors have allowed Samsung to continue selling high-end chips in China.

Speculation is growing that this window may be closing as Korea gets closer to a Trump trade deal, putting Samsung Electronics and other Korean technology giants that are heavily exposed in China under pressure. That said, Trump has already carved out tariff exemptions for smartphones and computers, in response to lobbying and pressure by U.S. technology leaders (not to mention concerns that U.S. consumers will be unhappy with sharp increases in the price of their digital devices). Given the growing number of loopholes that America has already created in its numerous tariff negotiations, it is likely that Korea will work out favorable terms when it gets to the table and also that the Trump administration will make many more concessions to others from which Korea Inc. may also benefit.

Japan’s Security Blanket

Like Korea, Japan’s alliance with the U.S. is based on decades of mutual trust, and a shared strategic vision of regional cooperation and trade. Trump’s attempts to rewire the global economy certainly complicates that relationship for both countries, but it is in some ways a simpler proposition for Japan. One reason is China. While Japan’s two-way trade with China, at over $291 billion, is roughly the same level as Korea-China trade, Japan does not depend on China for as many of its key strategic exports and has been more aggressive in limiting trade in semiconductors and other sensitive technologies or national security reasons. “Japan does not trust China very much now,” says a Tokyo-based business analyst, and therefore may not feel the need to maintain as delicate a balance in its dealings as does Korea.

The U.S.-Japan relationship boils down to one fundamental issue, according to the analyst: “Security. While this can mean food security and energy security, the primary issue for Japan is the willingness of the U.S. to uphold its regional defense security commitments.” Defense is the lens through which Japan views its tariff negotiations with the U.S., even though it appears the Trump administration is not currently linking the two issues, demonstrating a rare moment of geopolitical constraint.

It is likely that Japan will import more food and energy from the U.S. as concessions to trim its trade surplus (an estimated $5.4 billion in April this year). This is despite that food imports have long been a touchy issue in a country that takes pride in maintaining self-sufficiency in rice and other agricultural products. It may not have a choice, however, as growing inefficiencies in food production, exacerbated by Japan’s aging population and shrinking workforce, make Japan ever more dependent on imports.

Poor crop yields and panic buying have significantly reduced Japan’s rice stocks (an estimated 400,000 tons lower this year than last), causing the country to dip into its strategic rice reserves and forcing the resignation of the Minister of Agriculture. The cost of rice has nearly doubled within the last year, adding to Japan’s rampant inflation; at 111.5, the country’s Consumer Price Index hit an all-time high in April, further dragging down consumer confidence.

Throwing Cars Under the Bus

“Economically there is some urgency for Japan to make a deal with the Trump administration, but that’s probably not as important now as the politics,” says Paul Cavey, managing director at East Asia Econ. “No politician wants to be seen giving in to U.S. pressure, at least before the Upper House election,” referring to a vote scheduled for July 13 this year, when Japan will choose half of the members in its House of Councilors, the less powerful (but still influential) of the country’s two parliamentary bodies.

A contentious election has emboldened Japanese politicians to adopt tough rhetoric on the prospects of a trade deal with America, particularly around the country’s all-important auto industry. The U.S. accounts for roughly 30 percent of Japan’s global car sales, and lawmakers have been very vocal in their insistence that the Trump administration must take auto exports completely off the tariff table as a condition of any deal.

At the same time, this stance may be vote-garnering political bluster, rather than a deeply entrenched negotiating position. “Ultimately, Japan would readily throw its auto industry under the bus in a trade deal if their essential security needs were met,” observes the Tokyo analyst, adding that this might not even be much of a concession. “Japan’s carmakers are fairly insulated from tariffs,” because most of the 5.1 million Japanese cars sold in the U.S. last year were also made there.

Japanese manufacturers produced over 3.28 million cars in U.S. plants last year, and many have been trying to increase their capacity, in part because of the perceived weight such investments will carry in trade talks. This includes Honda, which recently announced intentions to transfer production of their new Civic Hybrid 5-door model from a Japanese plant to its U.S. facilities by July this year. “Unlike many of America’s other trading partners, Japan has always been and continues to be willing to make significant manufacturing investments in the U.S.,” says the analyst.

Time Is on Their Side

Korean and Japanese brands stand to lose export revenue and U.S. market share should they be exposed to the full whack of Trump’s tariffs come July 8^th. Moreover, Korea continues to risk getting caught in the crossfire of America’s ongoing tech trade war with China. Yet both countries are in fairly strong negotiating positions, even though, as Asia’s primary security guarantor, the U.S. does hold some serious cards. The pair are rare exceptions among America’s top trading partners in their willingness to increase investment in U.S. manufacturing and are both important sources of technology and innovations that further American productivity goals.

This will serve them in good stead in their respective discussions with the U.S. But the primary lever both Korea and Japan have to pull in their favor is time: time enough for more and more exemptions to be doled out for other countries and industries, and time for more U.S. legal battles to be fought in federal court. All of this will also create more time for the implications of much higher prices on cars, cosmetics and other key items to sink in for American lawmakers as consumers grow ever more cost-conscious.