Key insights
- Proposed tariffs under Trump's administration could increase the costs of consumer goods, affecting both retailers and consumers.
- The new administration’s immigration policies may lead to labor shortages in the retail industry, potentially increasing labor costs and causing staffing issues.
- The potential economic shifts, including possible changes to interest rates and tax legislation, could significantly impact the retail sector.
The incoming President-elect Donald Trump administration’s suggested policies could have a significant impact on the retail sector. The costs of consumer goods, labor policies, interest rates, and the prospect of what may happen if the Tax Cuts and Jobs Act (TCJA) of 2017 sunsets in 2025 could all become major factors in the industry.
Leverage and adapt to post-election tax impacts on your business.
Consumer goods and tariffs under the new administration
Costs of consumer goods are guided by the costs of the materials used to manufacture them or the costs of imported items. Potential tariffs could force the importer to raise inventory costs to the retailer and, depending on the overall bottom line, these increases may be passed on to the consumer.
The new administration has suggested the potential for a 10% to 25% duty on all imported goods, and an even higher percentage on Chinese products. President-Elect Trump has suggested a tariff as high as 25% on all imports from Mexico as a means of reducing immigration across the border. Because these tariffs involve so many consumer goods, the retail industry could be particularly exposed in this area.
Automakers
For the automotive industry, increasing tariffs may lead away from any focus on stabilizing supply chains, and could be harder on automakers, retail dealerships, and their consumers.
The new administration may also plan to limit the Inflation Reduction Act provisions affecting electric vehicle incentives and infrastructure. They also may suggest strengthening emissions standards, which could presumably force automakers to produce more fuel-efficient and lower-emission vehicles.
Food exporters
As many of our food supplies are imported, the new administration has also suggested implementing food tariffs.
Food exporters may include these tariffs in the price of their products. Additionally, the new administration may be looking to deregulate the food industry and dietary guidelines, as well as reducing funding for food assistance programs.
Immigration and retail: Potential labor challenges
Many employees in the retail industry are paid the mandated minimum wage, and many of those workers are immigrants.
The new administration’s suggested immigration policies, including the prospect of deportations, may affect the available workforce. This could lead to higher labor costs, staffing issues, and delays in deliveries of products to the consumer.
Potential economic shifts under Trump’s presidency
The new administration also suggested taking a direct role in how interest rates are set by the Federal Reserve, leaning on it to keep interest rates lower to fuel economic growth. Lower interest rates could result in reduced borrowing costs, potentially decreasing the prices of retail items being sold to consumers.
The TCJA is set to expire at the end of 2025. However, the new administration has expressed a desire to make many of the act’s provisions permanent. This may continue to help retailers through significant tax breaks such as the 20% qualified business income deduction.
How CLA can help
Understanding the suggested proposals from the Trump administration and their direct implications on various facets of the retail industry can equip you with crucial insights to help navigate and potentially leverage these changes for your business.
CLA tax professionals will be keeping a close eye on the situation, so watch for more details to come as the new administration sets its policies when taking office.
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