The Threat of New Chinese Tariffs Sent Stocks Tumbling

Wall Street didn’t look too happy on Thursday, in particular retail stocks, after a threat from new China tariffs emerged.

President Trump announced that the U.S. will put a 10% tariff on an additional $300 billion worth of goods from China starting on September 1st.

The U.S. Chamber of Commerce said the new tariffs “will only inflict greater pain on American businesses, farmers, workers and consumers, and undermine an otherwise strong U.S. economy.”

According to analysts, retail companies would be the most affected.

The SPDR S&P Retail ETF tanked over 3% as investors digested Trump’s announcement. Retail stocks like Best Buy, Office Depot and Abercrombie & Fitch all tanked roughly 10% after the news. Macy’s and Nordstrom also saw
losses of around 7% while Kohl’s saw a loss of 8%.

“The list of products these tariffs will hit are almost entirely consumer oriented,” remarked the Retail Industry Leaders Association. “This new 10% tariff on Chinese imports is a direct hit on consumer products and family budgets, plain and simple.”

“If these tariffs happen, American consumers will bear the brunt of these tactics via higher prices on everyday items like clothing, toys, home goods, and electronics,” their statement read.

“Particularly this last round is much more consumer than industrial focused,” said Oppenheimer analyst Brian Nagel on CNBC’s “Power Lunch. ” “Best Buy is very much the last man standing within the consumer electronics category but … it’s a much more price-sensitive discretionary purchase for the consumer.”

“We remain concerned that while most retailers expect to pass costs onto consumers, a deluge of concurrent price increases could potentially ‘shock’ or stall consumer spending overall,” Nagel wrote last month.

According to Credit Suisse analyst Michael Binetti, most of the apparel and footwear space has moved sourcing out of China but there’s still 10% to 15% of U.S. goods coming from China.

“Companies can’t price quickly, adding risk to C2H estimates before tickets can be reset in 2020,” Binetti commented.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.