It’s early May, but Amy Rutherford is already pulling back on holiday orders.
The cost of certain items, such as large lamps and Christmas ornaments, has steadily ticked up because of recent tariffs. Now, Rutherford says the surprise threat of new tariffs on Chinese imports — which President Trump proposed on Twitter this weekend — is further affecting her purchasing plans for Red Barn Mercantile, which sells home goods and gifts in Alexandria.
“We have a huge Christmas business,” said Rutherford. “I’ll still spend the same amount this year; I just don’t know how much product I’ll be able to bring in. We had 11 trees [of holiday ornaments] in the store last year; this year, it’s looking like we might have nine."
While Trump’s threat of escalating tariffs on $200 billion worth of Chinese imports has largely been dismissed by analysts as a negotiating tactic, retailers say the repeated uncertainty over price increases can be debilitating, particularly as they lock down orders for the crucial holiday season.
Retail is often a guessing game of what people will buy and when they’ll buy it, with many business owners placing orders for items months before they actually hit shelves. Hiring decisions, too, hinge on carefully calculated projections, and retailers say the unknowns surrounding new tariffs have forced them to reconsider plans for the rest of 2019.
“You start a business thinking you know how much things are going to cost, and then something like this comes along and changes everything,” said Lisa Hu, who founded the handbag company Lux & Nyx in October 2017. “Are these tariffs going to happen? Are they not? I’m having to make long-term decisions based on the little information I have now.”
Hu said she has largely scrapped plans to sell her handbags in department stores because she is worried she will have to shoulder the burden of new tariffs that might arise between the time stores place an order and when the imports arrive. Instead, she will focus on selling her handbags, which start at about $200, on her website, where she has more control over pricing.
New tariffs, she added, would affect supply and demand for her handbags as costs go up and consumers pull back.
The first round of Trump’s tariffs, which levied a 10 percent tax on nearly 6,000 types of imported products, went into effect in September. Those tariffs were supposed to rise to 25 percent in January, but Trump has twice pushed forward that date amid trade negotiations with China. The result, retailers say, has been constant uncertainty over if — and when — the cost of goods will suddenly rise.
Retailers said that concern took on a new level of urgency this weekend when Trump said in a pair of tweets that he would raise tariffs on $200 billion worth of Chinese imports from 10 percent to 25 percent beginning Friday.
An additional $325 billion worth of Chinese goods, he said, would face a 25 percent tariff “shortly” after that. “The Trade Deal with China continues, but too slowly, as they attempt to renegotiate,” he tweeted. “No!”
“Retailers are on high alert,” said Hun Quach, vice president of international trade at the Retail Industry Leaders Association, an industry lobbying group. “There is very little time for them to do anything about tariffs that will impact thousands of products Americans buy every day, from phone chargers and cling wrap to toilet paper, toothbrushes and dog leashes."
Ultimately, a 25 percent tariff on $200 billion worth of Chinese goods would cost the average American family of four $767, according to a report by the Trade Partnership. It would also reduce U.S. employment by nearly 1 million jobs and lead to a 0.37 percent drop in the country’s GDP.
“What it boils down to is: People are not going to buy as much anymore,” said Gail Ross, chief operating officer of Krimson Klover, a women’s apparel brand in Boulder, Colo., that sells to retailers around the country. “So far, it’s mostly affecting businesses. But soon enough, these tariffs are going to affect consumers, and it’s not going to be good.”
At Red Barn Mercantile, Rutherford said new tariffs would result in higher prices for consumers and lower profit margins for her.
“It will definitely take away from how much people will spend in our stores this year,” she said. “Instead of buying five things, they might just buy three if everything costs more.”