A Retailer’s Guide to Tariffs: What a Trade War Means for Retail SMBs


New tariffs and the ongoing trade war have had a significant impact on various types of retailers across the country. The U.S. and China, the world’s two most valuable economies, have exchanged a series of financial blows that have left retail businesses scrambling for solutions. Skyrocketing prices and a diminished availability between such integral parts of the global supply chain leaves a lot of unknowns.

Unfortunately, there appears to be no end in sight, so retailers are forced to wait out the storm. Washington continues to up the number of goods that face tariffs and China has responded in kind, driving up prices for imported goods. With each side hoping to get in the last blow, the terms of the tit-for-tat have quickly escalated.

Of course, higher prices for imported wholesale goods means higher prices on the shelves. And in turn, fewer purchases. For many retailers, the trade war has been remarkably costly and could prove to be even more so down the road.

So let’s examine the details of it all and talk about what a trade war means for retail businesses. While the effects of it don’t mean dire circumstances for most businesses, it’s important to stay educated and aware of how the industry is changing.

What’s Happened in the Trade War So Far?

While things are constantly in flux, the total amount of tariffed goods at the time of this publication has been $550 billion from the U.S. side on Chinese goods, and $185 billion from the Chinese side on U.S. goods. Below is a look at a timeline of what’s happened so far and how it might affect your business.

January 22, 2018 – The U.S. places tariffs on all washing machines (20%) and solar cells (30%) imported from China.

March 9, 2018 – In one of the biggest moves, Washington ordered tariffs placed on aluminum and steel, 10 and 25% respectively.

April 2, 2018 – China imposes tariffs on $3 billion worth of U.S. goods in response to steel and aluminum tariffs.

April 3, 2018 – U.S. responds with tariffs on an additional 1,334 products worth $50 billion at a 25% rate.

April 4, 2018 – China responds in kind with 25% tariffs on 106 new products worth about $50 billion.

May 3-7, 2018 – Trade talks are initiated to help end the trade war. The U.S. insists that China take steps to lower the trade gap by $200 billion by 2020.

June 15, 2018 – China 301 List 1 is announced but with a reduced number of products – 8181 instead of 1,334.

June 16, 2018 – China announces an increase in its initial tariff list along with a second round worth $16 billion.

July 6, 2018 – The China 301 List 1 tariffs go into effect. These tariffs cover electronic products, like lights, batteries, tools, screens, etc. In total, a 25% tariff was placed on $34 billion worth of imports.

July 10, 2018 – List 3 is announced.

August 3, 2018 – China announces second round of tariffs on $60 billion worth of U.S. goods.

August 23, 2018 – China List 2 goes into effect, adding tariffs to thermometers, plastics, tin foil, rubber, and more. Altogether, this covered $16 billion in products. China’s second round of tariffs on the U.S. also goes into effect.

September 7, 2018 – Trump threatens yet another round of tariffs worth $267 billion. This would add tariffs to virtually every Chinese import to the U.S.

September 24, 2018 – List 3 places another 10% tariff on $200 billion on over 6,000 Chinese products with a planned increase to 25% beginning on January 1, 2019. These cover a wide range of goods, including furniture, sports equipment, household appliances, construction materials, hygiene products, and much more.

December 1, 2018 – Trump delays the 25% increase on the List 3 tariffs until March 1, 2019.

February 24, 2019 – The List 3 increase is suspended indefinitely. Negotiations seem to be making progress after months of trade talks.

May 5, 2019 – Trade talks don’t get far and the List 3 increase is back on, this time scheduled to go into effect just 5 days later on May 10, 2019.

May 13, 2019 – China announced a retaliatory hike in tariffs on $60 billion worth of U.S. goods started June 1, 2019.

May 15, 2019 – Tariff delays apply to any Chinese List 3 goods that were already shipped and “on the water” prior to May 10.

May 16, 2019 – Escalating the war to other realms, the U.S. bans Huawei Technologies from buying anything from U.S. companies.

June 10, 2019 – Another “on the water” delay for List 3.

June 15, 2019 – List tariffs finally increase from 10% to 25%.

August 6, 2019 – U.S. Treasury accused China of manipulating currency in apparent retaliation.

August 13, 2019 – China 301 List 4 is announced. 10% tariffs will be imposed on $300 billion in additional import goods. List 4A is set to go into effect on September 1, 2019, and 4B on December 15, 2019.

August 23, 2019 – Trump announces escalation on tariffs for each list. 1-3 will jump from 25% to 30% and List 4A and 4B from 10% to 15%.

September 1, 2109 – List 4A starts as scheduled despite months more of trade talks, with tariffs now on Chinese apparel products, shoes, TVs, baby items, dishwashers, stationary, etc.

September 2, 2019 – China files another complaint against the U.S. to the World Trade Organization (WTO).

September 11, 2019 – China announced tariff exemption for a variety of U.S. imports.

October 11, 2019 – Tariff increases planned for Lists 1-3 are delayed due to progress towards a “Phase One” deal.

December 15, 2019 – List 4B is scheduled to go into effect, including electronics, toys, Christmas decor, and more.

What the Trade War Means for Retailers

Retail appears to be feeling the effects of the trade war, especially with the increases in U.S. tariffs imposed during the fall of 2019. When List 4A and 4B were announced, the SPDR S&P Retail ETF fell over 3% and several of the country’s biggest retail stores saw stock plummet.

This most recent round of tariffs had a far greater impact on common retail items, such as electronics, toys, apparel, footwear, home goods, and more. Earlier goods targeted by tariffs focused more on agriculture and manufacturing.

These changes will impact where many U.S. retailers source their goods. Already, businesses across the country are looking for other options to find common retail items.

Holiday sales are unlikely to see many changes due to the tariffs. Though the Federal Reserve estimates that the tariffs have cost the average consumer about $800 per year, the latest tariff increases didn’t apply to most holiday goods that were already “on the water,” thus avoiding those increases mentioned above.

Still, there have already been some big changes to the retail industry due to the tariffs:

The Ports – Due to the constantly evolving status of tariffs, staffing at ports is unpredictable. This has led to significant delays at the ports and slower processing so retailers don’t get their goods as quickly.

The Storage – Many retailers stocked up on goods prior to the latest round of tariffs, Lists 4A and 4B. This means that they’ll have to pay for increased storage space, cutting into their gross margins.

The Loans – Many retailers rely on something called asset-based loans. Some also call them revolving lines of credit. Basically, most businesses go through ebbs and flows of sales, with some seasons being more profitable than others. Therefore, these asset-based loans are used to pay for new products before the existing product is sold. Typically, a lender will base this loan on the retailer’s inventory (approximately 65% of the at-cost value is standard). If inventory levels drop too low to qualify for these loans, retailers are at risk of losing the loan and going bankrupt.

About the Author

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Michael Chalberg

Michael has long focused his writing on the world of retail and small businesses. He''s been a part of the KORONA POS team since 2018 and loves helping entrepreneurs find ways to adapt and succeed. In his spare time, you'll likely find him hiking somewhere in the Southwest.

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