Retail bankruptcies to hit the US, should Trump tariffs stay in place

 

The US retailers mostly import their goods from China and Trump tariffs have mostly hit China. According to Peter Schiff, if Trump’s tariffs stay in place, there will be a wave of retail bankruptcies.

 

The American stockbroker and gold evangelist said that retailers will be forced to close down. If not, they will have to downsize as businesses cut costs and lay off workers.

 

This will not be a small hit because other industries will be affected. Peter Schiff said, “Landlords will be stuck without tenants, and banks will be stuck with empty retail space on defaulted commercial loans.”

This looks like something Trump wants. The main problem in the US economy has been the trade deficit. Economists have tried to explain the trade deficit as a good thing for the US because of its strong currency. But Trump doesn’t want to hear it. 

 

The collapse of the retail industry will lower the trade deficit. According to Schiff, “All the goods Americans can no longer afford to buy will no longer be imported. We win.”

 

The retail industry strategy

 

 Peter Schiff has warned, “In the end, the U.S. will have far fewer retail businesses left. They will sell a lot less merchandise, but they will do so at much higher prices.” Of course, prices will rise more than the tariffs because retailers have to cover their fixed costs for lower sales volumes.

For instance, this week’s Walmart (WMT) investor day is also being watched. This is because their comments about how they plan to deal with higher costs are important. Dollar General could be waiting to see what Walmart decides if it has planned to pass on costs to customers. Dollar General will also have more room to raise prices.

 

On the other hand, If Walmart wants to compete on price, that would be bad for Dollar General because it would make the competition tougher. Meanwhile, Dollar General stock has gone up almost 6% in the last five days, while the S&P 500 has gone down more than 10%.

 

 However, a company report says that 41% to 43% of all Dollar Tree’s goods are direct imports. In addition, most of those imports come from China. Analysts have warned that stores that sell a lot of general merchandise and non-essential items will be hit harder.

Ross Stores (ROST) plans to play the off-price space and market more generally, given uncertainties around the consumer. It also wants to prioritize marketing and store experience.

 

Read More Here:  MSN