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Trump's tariffs send retailers into a maelstrom

Illustration: Rebecca Zisser/Axios

There are no calm waters in sight in the U.S.-China trade fight, but even before the latest round of tariffs, the retail industry had been tumbling in a whirlpool.

The backdrop: For the past few quarters, retailers have warned analysts about the U.S.-China trade war's potential to hurt sales as tariffs push prices up and turn shoppers away. But those effects have been invisible so far because the first two rounds of tariffed products largely excluded consumer goods.

Now things are changing, with tariffs being imposed on the third and fourth "lists" of goods set out by the Trump administration.

  • Steep 25% tariffs on the third list, which went into effect this month, will affect things like instant coffee and bathrobes.
  • The fourth list includes all imports from China and will touch common consumer products like clothes and shoes.
  • Worth noting: Several types of apparel are heavily tariffed even without the additional duties, says Hun Quach of the Retail Industry Leaders Association. For example, swimsuits already face a 25% tariff and dresses, 16%.

Where it stands: In recent earnings calls, big retailers like Kohl's, Nordstrom and JCPenney have reported disappointing sales numbers and said that the impact of tariffs could make things worse.

The big picture: The threat of tariffs comes amid decades-long changes in U.S. retail that have been shuttering malls and emptying out Main Streets across the country.

The latest: Dressbarn plans to close all 650 of its stores, and Payless ShoeSource will close its 2,600 stores by July.

  • Hundreds of footwear sellers, including Nike and Adidas, sent an open letter to President Trump saying the effect of tariffs would be "catastrophic" for them.
  • Even the retailers reporting strong growth, such as Macy's and Walmart, said tariffs will likely drive prices up.
  • As many as 12,000 store closures could happen this year if tariffs become a tipping point for smaller or struggling retailers, writes UBS analyst Jay Sole.

The bottom line: "This last round of tariffs, should it occur, is going to be a big challenge," said Mike Zuccaro, an analyst with Moody's.

Go deeper: The world can't afford a trade war right now