Catherine Rampbell: Tariffs hurt iconic US retail industry
Published 12:00 am Thursday, June 20, 2019
By Catherine Rampbell
An iconic American industry is struggling.
This sector has long been battered by forces beyond its control: globalization, automation, “disruptive” new competitors, changing tastes. Bankruptcies mount, and workplaces shutter around the country. Big, empty buildings, once bustling with young people, have been left to rot.
To add insult to injury, the industry is poised to get slaughtered by President Trump’s escalating trade wars. But notwithstanding the U.S. trade representative’s public hearings on the subject that began Monday, hardly anyone seems to care.
The industry I’m referring to? Retail, of course.
Retail is larger than any of the sectors Trump usually dotes on, the ones he bestows with bailouts and subsidies and affectionate tweets. “Retail salesperson” is the single biggest occupation in the country. Total industry employment eclipses that of manufacturing by some 3 million jobs, according to the Bureau of Labor Statistics. In fact, more people work in department stores alone than in the entire coal mining industry — by a factor of 20.
Lately, retail has been suffering. From January through mid-June, U.S. companies announced plans to close some 7,000 brick-and-mortar stores, more closures than in all of 2018, according to Coresight Research. This despite the fact that the economy has posted strong growth and consumers have more money in their pockets thanks to the recent tax cuts. Many dark or soon-to-darken storefronts are household names, such as Payless ShoeSource, Gap, J.C. Penney, Family Dollar.
They have struggled to compete as customers spend more of their money online and on other purchases, such as restaurant meals. Malls were also vastly overbuilt, growing more than twice as fast as the U.S. population from 1970 to 2015. So even without Amazon and other e-commerce, a correction was probably coming eventually, if not necessarily the retail-pocalypse today.
There are lots of parallels with Trump’s pet industries. Retail, for instance, is dominated by demographics at the heart of Trump’s political base: financially insecure non-college-educated whites displaced by technological change.
Yet, for some reason, the decline of retail — and the 160,000 industry jobs eliminated since January 2017 — hasn’t inspired nearly the same level of sympathy as have similar challenges in other industries. Perhaps that’s because retail isn’t as geographically concentrated as manufacturing. Bombed-out malls dot the country, punching holes in local employment numbers. But there’s no Rust Belt-like locus for presidential candidates to pander to.
Or maybe it’s that retail isn’t as “manly” as manufacturing, in the literal sense: About half of retail payroll employees are women, compared with just more than a quarter of manufacturing workers. Whatever the cause, that lack of sympathy is going to be a problem. Because just as these companies are enduring painful structural change, Trump is threatening to jack up their costs.
When Trump began his tariff hikes in early 2018, he mostly spared consumer goods, with some notable exceptions. His tariffs on steel, aluminum and $250 billion of Chinese imports primarily targeted inputs. Then last month, he announced plans to levy new duties of 25% on the remaining $300 billion or so of Chinese products. What’s left is largely consumer goods: cellphones, clothing, toys, shoes and so on.
Retail companies, understandably, are freaking out. They source much of their inventory from China and can’t reroute their supply chains easily, cheaply or quickly. Last week, 661 firms — including major players such as Costco, Target and Hallmark — signed a letter pleading with the administration not to use tariffs as a cudgel in its efforts to address China’s trade abuses.
These, like the U.S. trade representative’s public hearings, echo what big retailers had already been warning investors and customers: Sweeping tariffs will stress already-thin profit margins and lead to layoffs. They will also raise prices for U.S. households by hundreds or thousands of dollars, wiping out the value of Trump’s tax cuts.
Catherine Rampell’s email address is email@example.com.