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We're back. And it's Friday (!). Dion is still on vacation, but he makes a guest appearance in this newsletter.

Situational awareness:

  • In one of her first major speeches as ECB president, Christine Lagarde said monetary policy would continue to support the economy and called for higher government spending. (Bloomberg)

Today's edition is 1,296 words, a 5-minute read...

1 big thing: Retailers kick trade war costs to small players

Illustration: Eniola Odetunde/Axios

Dion Rabouin and Erica Pandey report: Big retailers like Bed, Bath and Beyond, Target, and TJX Brands are refusing to accept tariff price increases from their brand suppliers, telling the companies they will have to either eat the tariff costs or find another buyer.

Why it matters: This forces the costs of President Trump's trade war with China down to smaller businesses that can hardly afford them, while the big companies keep the impact of tariffs at bay.

  • The hard line being taken by the bigger players could be enough to shutter smaller retailers. Without tariff relief or the ability to pass on the 10%-25% price increase they face, some small businesses say they will likely have to close within a year or so.

The state of play: After the next round of tariffs — scheduled for Dec. 15 — is implemented, nearly every product traded between the U.S. and China will be impacted.

  • That's sure to put even more pressure on the smaller retailers, as bigger companies continue to leverage their size and influence to dodge price hikes for as long as possible.

What we're hearing: "The material cost is more than 50% of the product, so it’s a significant cost," Dan Digre, president of Misco (Minneapolis Speaker Co.), which his father founded in 1949, tells Axios. "You start taking out 10%-15%, and it’s hard to be profitable."

  • The head of another small retailer that supplies bigger chains — Surell Accessories of Troy, N.H. — tells Axios: "We’re just holding on until we can figure this out."
  • "But this certainly isn’t a great situation for us. Another year or two and there’s no way we could survive this thing," says Darryl Meattey, founder and CEO of Surell, which sells fur hats, vests, scarves and mittens.

What we're not hearing: Representatives from Bed, Bath and Beyond, and TJX — which includes TJMaxx, Marshalls and Burlington — didn't return emails from Axios asking for comment.

  • According to the Wall Street Journal: "Days before new tariffs went into force Sept. 1, Target sent a letter to suppliers saying that it 'will not accept any new cost increases related to tariffs on goods imported from China.'"
  • Target CEO Brian Cornell told CNBC this week: “We’ve made sure we have worked with our vendors to try to offset some of those [tariff] costs.”
  • Smaller suppliers tell Axios that Bed, Bath and Beyond and TJX have been refusing the tariff costs, too.

The intrigue: Small business owners who spoke to Axios say business is strong — they've got lots of orders to fill and clients to serve, so they can't reduce their workforce or cut costs to offset the tariff expenses. They are simply treading water.

  • Instead, they're putting off investments in technology, marketing and machinery and, in some cases, eating into cash reserves.

Where it stands: So far, the strong economy has helped buffer small businesses against the blunt impact of tariffs: The National Federation of Independent Business' monthly "Optimism Index," a bellwether of small business sentiment, rose in October, with 25% of respondents saying that finding qualified labor was their top complaint — more than those who cited taxes or regulations.

  • The bottom line: Despite mounting pressure from tit-for-tat tariffs, small retailers have managed to stay afloat. But questions linger over how long that can continue if tariffs persist — and there's no off-ramp for the trade war in sight.
Bonus: It’s not just Trump’s trade war
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Reproduced from World Trade Organization; Note: Does not reflect cumulative value; Chart: Axios Visuals

Trade is getting more restrictive around the globe. In the six months through October, newly introduced trade restriction policies in G20 countries covered the 2nd highest amount of goods on record, according to a new report from the World Trade Organization.

  • G20 economies implemented 28 new trade-restriction measures in the last six months — not just through tariff increases, but also through import bans and stricter customs procedures.
  • What they're saying: “The report's findings should be of serious concern for G20 governments and the broader international community,” WTO Director-General Roberto Azevêdo said in the release.
  • “New trade restrictions and increasing trade tensions will only add to the uncertainty that is dragging down growth in the world economy.”

Separately ... Economists at the OECD said on Thursday that “trade conflict, weak business investment and persistent political uncertainty are weighing down on the world economy and raising the risk of long-term stagnation.”

  • The report also warns that ratcheting up the U.S.-China trade war would “disrupt supply networks and weigh on confidence, jobs and incomes.”
2. A potential discount brokerage powerhouse
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Data: 10-K filings; Chart: Axios Visuals

Wall Street analysts have long called for consolidation among discount brokerages, which they said needed to get bigger to lessen the blow from the race-to-the-bottom on fees.

  • “The long-speculated potential for M&A among the group only intensifies as scale becomes increasingly important. The realities of expense savings via consolidation among the group remain significant,” analysts at Jeffries wrote in a note to clients last month.

Driving the news: Those predictions may have started to play out.

  • Several news outlets have confirmed reports that Charles Schwab is in talks to buy fellow discount broker TD Ameritrade for $26 billion (its current market value).
  • "The companies are hoping the combination... will give them more scale to withstand the impact of the industry's move toward zero commission for trades,” an unnamed source tells Reuters.

Why it matters: Charles Schwab’s decision to slash trading fees to $0 forced other discount brokerages to follow suit. But the decision was a bigger blow for TD Ameritrade and E-Trade, which depend more on commissions to boost revenue.

  • What they're saying: TD Ameritrade’s Tim Hockey, who announced he was stepping down as CEO in July, defended the decision to slash fees, using size as a defense: "Scale is important. We have scale. We're very comfortable with our earnings power now, even in this new [lower fee] environment."

The tie-up between Schwab and TD Ameritrade would create a giant with over $5 trillion in client assets.

  • Charles Schwab’s "management has been consistent in its messaging around scale playing an increasing role in determining the industry’s ‘winners’ and ‘losers,’” Christopher Walsh, vice president of equity research at Buckingham Research Group, told MarketWatch.

Of note: Discount brokerages got their start after the SEC abolished fixed trading commissions and allowed the creation of cheaper services than the legacy Wall Street firms that once dominated the space.

  • Competition from the discount houses has prodded the likes of JPMorgan into the trenches of the price war.
  • The bank said Thursday it’s “giving free online trades to more customers and lowering the amount of money needed to open one of its robo-adviser accounts,” Reuters reports.
3. Chart du jour
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Data: The Conference Board; h/t Deutsche Bank’s Torsten Slok; Chart: Axios Visuals

Consumers scaled back plans to buy a new car last month.

Why it matters: It may signal consumers' lack of confidence in the staying power of the U.S. economy.

  • What they’re saying: “If we find that consumers are concerned about the broader economy and they think that a recession may be coming next year or they’re worried about their own economic stability, they’re going to pull back from ... big-ticket purchases like vehicles,” Charlie Chesbrough, senior economist at Cox Automotive, tells Axios. 

But, but, but: “We are at the late stage of this business cycle. Pretty much everyone who’s wanted a new vehicle has bought one. It’s almost vehicle saturation at this point,” which might also explain the drop-off in purchase plans, Chesbrough says.

4. 1 📉 thing: A blow for canned tuna

Photo via Getty Images

Bum­ble Bee Foods, the iconic canned seafood brand, filed for bank­ruptcy protection — crushed by the weight of legal expenses “stem­ming from its in­volve­ment in a con­spir­acy to fix prices on canned tuna,” as the Wall Street Journal reports.

  • It also plans to sell its assets to Taiwan-based FCF Fishery Co. for $925 million.
  • Bumble Bee's current owner, private equity firm Lion Capital, bought the company for $980 million in 2010.

The bottom line: Bumble Bee’s sales took a hit as consumer appetite for canned tuna waned. But ultimately its scheme with competing brands to keep prices of canned tuna artificially high — which drew a hefty criminal fine and customer lawsuits — pushed the company into bankruptcy.

Have a great weekend! ☀️ See you on Monday.