Retailers across the board — from discount chains and footwear brands to big box stores — are buckling down for the unknown as potential tariffs from President-elect Donald Trump could land as soon as Monday.
Trump has floated a range of new tariff ideas, such as a 10% tariff on all imports and a 60% tariff on Chinese imports.
In his Senate confirmation hearing on Thursday, Trump's Treasury Secretary pick, Scott Bessent, said tariffs will be part of Trump's plans in the months ahead, calling it "a more generalized tariff as a revenue raiser for the federal budget."
"We haven't really seen anything like this since the 1920s and '30s. Almost every president between then and Trump has favored trade liberalization, whereas Trump is talking about taking us back to protective tariffs," Phillip Magness, a senior fellow at the Independent Institute, said.
With congressional majorities, "he might be more emboldened to use the tariff powers of the presidency than he was the last time," Magness added.
Retailers are discussing the concept of "playbook-plus," Joe Feldman of Telsey Advisory Group told Yahoo Finance.
The companies worked with vendors, adjusted pricing, and diversified supply chains under Trump's first administration, leaving them better prepared for more tariffs, per Feldman.
Yet, if the proposed tariffs take effect, every retailer will have to raise prices, Feldman said, likely within three to six months.
Trucks are seen transporting containers in Qingdao Port, east China's Shandong province on Jan. 13, 2025. (STR/AFP via Getty Images) ·STR via Getty Images
Dollar stores, footwear brands hit hard
Discount retailers like Five Below (FIVE) and Dollar Tree (DLTR) will be among the retailers most impacted.
Imports from China make up roughly 30% of Five Below's sales, per data from Feldman.
"That's been a concern and probably an overhang on that stock because people are just very concerned about what tariffs are going to mean," he added. Shares have fallen more than 50% in the last year.
Dollar Tree CEO Michael Creedon said at its third quarter earnings call that the team can mitigate risk based on its experience in 2018 and 2019.
Overall, direct imports make up 41% to 43% of Dollar Tree's total retail value purchases, and China supplies the majority of those imports, per a company filing.
Dollar General (DG) will be better positioned given that 75% of its goods sold are foods and consumables. It only imports 4% of its inventory from China.
Big box rivals Walmart (WMT) and Target (TGT) will be affected differently.
Saturna Capital's Will Jones said big box retailers are "fairly savvy" in mitigating impacts and will likely be able to "shuffle around" where their products come from.
Walmart touts that two-thirds of its annual product spend is made, grown, or assembled in the US.
"We're positioned to manage it, but what I worry about is customers experiencing higher prices, and we're going do everything we can to try and keep them low," Walmart CEO Doug McMillon told Yahoo Finance's Executive Editor Brian Sozzi.
McMillon met with Trump one-on-one at Mar-a-Lago earlier this month, and "a range of topics" were discussed, according to a Walmart spokesperson.
Target (TGT) may face a greater impact since it imports roughly half of its goods, according to sources Yahoo Finance spoke to.
"Target sells a lot less food as a percentage of sales than Walmart does, that's what makes their exposure more than Walmart," Goldman Sachs managing director Kate McShane told Yahoo Finance, though she noted Target will be able to negotiate with vendors.
Walmart CEO Doug McMillon shakes hands with US President Donald Trump at the White House on March 13, 2020, in Washington, D.C. (Chip Somodevilla/Getty Images) ·Chip Somodevilla via Getty Images
Footwear giants like Adidas (ADDYY) and Nike (NKE) are facing a tough road.
According to Matt Priest, CEO of the Footwear Distributors and Retailers of America (FDRA), 99% of total US footwear is imported from countries like China, Vietnam, Indonesia, Cambodia, Italy, India, and Mexico, among others.
At this week's ICR conference in Orlando, On Holding (ONON) co-CEO Martin Hoffmann told Yahoo Finance that tariffs "will certainly have an impact on the prices of the industry."
He added, "[if] there are higher duties on imports from Vietnam or Indonesia, where we manufacture, then we will see ... how we deal with it."
Brooks Running CEO Dan Sheridan called it a "huge headwind" for the entire industry, as the industry already faces a 27% tariff on imports from China and roughly 20% on Vietnam imports.
"An additional [20%-25% tariff] ... it's huge," he said on Yahoo Finance's Opening Bid podcast. "To absorb that as a business begins to take investment out of R&D ... We have to pass those on to the consumer and you can't pass a 25% lift in cost completely."
Priest said back in December, retail members of the footwear association were "hanging tight" amid the uncertainty. A couple of companies were "hedging their bets" and adding roughly 10% into their wholesale price model in catalogs that they provide to stores.
Specialty retailers will face a multitude of challenges. American Eagle (AEO) sources from more than 350 vendors, primarily in Asia, while 26% of Lululemon's (LULU) fabrics originate from China.
However, William Blair analyst Sharon Zackfia said Lululemon is "very well positioned" to adjust to potential China tariffs.
Another potential repercussion is losing Chinese business. Athleisure brands like Lululemon or Under Armour (UA) have a sizable or growing market in the country.
"Do you have the consumer in China push back if there's kind of some sort of trade war between China and the US?" Zackfia asked.
Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
