(CNN) – America's largest stores and consumer brands have avoided serious damage from the long-term China trade clashes. But the tariffs start to bite in the retail sector.
Earlier this month, Trump administration raised tariffs to 25% of $ 200 billion Chinese goods. The tariffs apply to consumer products such as luggage, mattresses, handbags, bicycles, vacuum cleaners and air conditioners. In addition, the Trump administration has threatened to expand the tariffs on Chinese imports to another $ 325 billion in goods – including toys, clothing, shoes and consumer electronics.
Although major retailers have developed strategies to mitigate the effects of tariffs so far, warned that the trade war is affecting business. Shoppers will bear many of these costs.
Walmart, Target, Home Depot, Kohl, Macy and others said in the past week that tariffs forced them to either change their financial prospects, rebuild carefully designed supply chains or consider raising price tags to customers.
"We're worried about tariffs because they lead to higher prices for everyday products for American families," says CEO Brian Cornell to analysts Wednesday.
Home Depot said new 25% rates will add $ 1 billion to its costs. Kohls, which imports approx. 20% of its goods from China lowered the guidance for this year partly due to higher charges from tariffs.
AutoZone and Nike
Retailers claim higher costs from tariffs will force them to make a tough decision: Record prices for consumers or eat costs and take a profit. Most say they will raise prices, although it is not clear when consumers can see higher costs on the shelves or know how much.
"We can assure you that any increase in the cost of importing shoes has a direct impact on US footwear consumer", Nike, Adidas, Foot Locker and DSW parents Designer Brands wrote in a letter to the administration on Monday. Proposed tariffs on shoes from China would be "disastrous" for consumers and the footwear industry.
AutoZone CEO William Rhodes said his company would raise consumer prices if tariffs increased the cost of buying auto parts.
"If we actually experience higher costs, it will be our intention to pass these higher costs on to our customers," Rhodes told analysts Tuesday.
Walmart also said it would raise some products due to the Trump Administration tariffs on Chinese goods.
"We will continue to do everything we can to keep prices low. That is who we are. But elevated prices will lead to increased prices, we believe, to our customers," Walmart financial chief broad biggs told journalists on a call after the company's earnings last week.
rates were an important focus below the retailer's latest rate of earnings. According to a FactSet analysis, 26 retailers on the S & P 500 mentioned "rates" on analysts call the last three months compared to just seven in the same period last year.
However, the Trump administration rejected the effects of tariffs on shoppers.
Treasury Secretary Steven Mnuchin said Wednesday in a House Committee hearing that he did not expect there to be "significant costs" to consumers. "I don't necessarily agree," said Mnuchin, when it was pushed by Democrat Rep. Cindy Axne in Iowa, whether consumer goods prices would be higher.
With global supply teams and huge scales, Walmart, Target and other big-box dealers are in better positions than most companies dealing with tariffs.
Cornell, Target's CEO, said that the retailer's wide range of goods was a "competitive advantage" and allowed it to balance the impact of tariffs "in ways not available to a single-category retailer."
Still, An additional 25% duty on all goods from China wiped out all the growth in retail earnings over the next 12 months, according to Greg Melich, Evercore ISI analyst.
Key chain in the supply chain
Retailers have bought most of their goods in the coming months, according to analysts. But trade uncertainty makes it difficult for them to plan their inventory for the winter holidays, says Simeon Siegel, analyst at Nomura Instinet.
The companies "live on the edge of a tweet trying to plan long-term," said. The tariffs come at a bad time for retailers who are already facing online disruptions and rising labor and transportation costs.
Chinese labor and factories are vital links in the largest US retail supply chains, and companies say there are barriers to quickly adapting their intricate supply network.
Walmart imports 26% of its products from China, UBS & # 39; Lates estimated, while Target imports 34% of its products from China. Other companies, including sports goods, auto parts and furniture sales, have even greater exposure to China. For example, Dick's Sports Goods imports 51% of its goods from China, while Bed Bath & Beyond imports 53% of its goods from China, according to Lasser.
Shoe companies are closely linked to China. The country accounted for 72% of all footwear imported into the United States in 2017, according to data from retailers.
China is an "important sourcing country and consumer market for us", Nike said in its annual securities filing.
"Footwear is a very capital-intensive industry, with many years of planning to make purchasing decisions, and companies cannot simply move factories to adapt to these changes," wrote shoe companies in their letter to the administration.
Boost for Ollie & TJMaxx
There may also be unexpected winners from retail tariffs: discounters such as TJMaxx, Ross Stores and Ollie's Bargain Outlet.
Ollie believes, for example, that it will benefit from the administration's tariffs for Chinese goods. This is because several companies will have extra stocks or will cancel orders as they drive to import goods from China.
"We have the opportunity to jump on it," said Ollie's CEO Mark Butler in December.
Tuesday TJX CEO Ernie Herrman said "market disturbances" as tariffs create "buying opportunities" for his business.
Correction: An earlier version of this article incorrectly reported the state represented by the Democratic Congress Cindy Axne.
– CNN Business & # 39; Katie Lobosco and Donna Borak contributed to this article.