The fallout from President Donald Trump's trade war may hit consumers in a much bigger way at the start of next year, according to economists and major retailers.
Retailers have been able to shield consumers from the president's steep tariffs for longer than many economists expected, but business executives and corporate analysts are running low on inventory they stocked up on before those duties kicked in — which could result in price increases as soon as this month, reported Politico.
“In the first half of next year, we are concerned that consumers are going to start to see the price increases become a little more broad-based, and there may not be all the [holiday sales] promotion to help clear through some of that,” said Joseph Feldman, a senior managing director at Telsey Advisory Group. “So that could be a little bit of a sticker shock for some people.”
The Trump administration is highlighting record Black Friday shopping as a sign the tariffs aren't hurting the economy like many predicted, but major retailers such as Kohl’s, Williams-Sonoma and Under Armour say price hikes are coming within weeks.
"A post-holiday economic hangover would be a blow to an administration and Republican Party that are already struggling to convince Americans they are effectively addressing cost-of-living concerns," Politico reported. "Democrats have been successfully pounding the issue in off-year elections and have made affordability a key talking point heading into next year’s midterm elections — prompting growing frustration and alarm among vulnerable Republicans."
Many companies absorbed much of the tariff costs for months, but the Big Three U.S. automakers are reporting massive losses related to the trade war, despite some relief on auto tariffs carved out in trade deals.
“There’s only so long you can play those games. Inventories get drawn down, all of those things eventually wear out, and that’s kind of where we are now," said Wayne Winegarden, a senior fellow at the Pacific Research Institute. "[Companies are] trapped because you have a cost increase, you really don’t have time to re-source things, at least not in the short term, and you’re certainly not sure if re-sourcing is the right thing to do, because perhaps the tariffs will be deemed illegal, so inevitably, they’re going to get passed through in different amounts.”
Small businesses have less capacity to absorb higher costs from tariffs, and some of them have been forced to take out loans to pay for the tariffs or sell directly to customers at a loss.
“At this point, we’ve really switched from working for profits to working for tariffs,” said Jared Hendricks, CEO of the Utah-based holiday decorations company Village Lighting. “We are just in business to pay off our tariff debt. This year, we’ve been a little sheltered, but next year will be worse.”
