US Retailers Warn Trade Wars Will Unleash "Unavoidable" Price Hikes Before Holidays

While it seems that trade disputes between the US, Mexico, and Canada are de-escalating, the trade conflict with China is not. President Trump ramped up the trade war on Monday as $200 billion in Chinese imports took effect. This is the third round of US tariffs on Chinese imports, a significant escalation of the conflict between the world's two largest economies.

And caught in the middle of the crossfire are US retailers, who have spent a great deal of time on investor conference calls warning about imminent price hikes during the upcoming holiday season, which could send shock waves through the wallets of American consumers.

The chief executives from Walmart, Target, Gap Inc. and Best Buy, among others, have been some of the most vocal companies warning about "unavoidable" price hikes.

According to a letter from Robert Lighthizer, the US Trade Representative, tariffs on some $200 billion worth of Chinese imports took effect Monday. There are several hundred items on the list, including electronics, kitchenware, tools, and food. The taxes are set around 10 percent but will jump to 25 percent at the beginning of 2019.

The resulting margin compression will force retailers to either eat the cost of the tariffs or pass it along to consumers, right before the critical holiday season: "The new tariffs are bad news for the retail sector, especially as the latest round seems to extend the tax to a vast array of consumer goods," GlobalData Retail Managing Director Neil Saunders said in comments emailed to Retail Dive.

"Many retailers will now be faced with a difficult choice of whether to pass the cost increases across to consumers or to take a hit on their margins. The exact response will vary from retailer to retailer but, both strategies are likely to be used."

In a late cycle economic environment, tariffs are especially dangerous for retailers because it could exacerbate the effects of other rising costs, "including more spending on technology, elevated logistics costs, higher gas prices, and rising labor expenses. In short, additional tariffs are the last thing the retail sector wants," according to Saunders.

The new duties are across a wide assortment of goods, from apparel to appliances, mainly covering consumer products. Retail Dive said some retailers are working with suppliers on how to respond to their impact, while others look to shift their manufacturing bases.

Reshifting supply chains takes time and are very costly. Some small and medium-sized companies could face financial hardship due to the disruptions.

"Of course, it’s also related to the ability of our vendors to observe the tariffs, and of course we are having negotiations, or over time, usually not in the short term but over time, to diversify the supply base," Best Buy CEO Hubert Joly told investors last month, according to a conference call transcript. "So, it’s a complex undertaking."

Before the holidays, low-margin consumer goods, price hikes are inevitable. "As we said many times, as a guest-focused retailer, we're concerned about tariffs because they would increase prices on everyday products for American families," Target CEO Brian Cornell said last month, according to a conference call transcript.

"In addition, a prolonged deterioration in global trade relationships could damage economic growth and vitality in the United States. Given these risks, we have been expressing our concerns to our leaders in Washington, both on our own and along with other retailers and trade association partners," Cornell said.

Last week, Walmart sent a letter to the Office of the United States Trade Representative, warning that the trade war impact will soon lead to price hikes.

The result of $200 billion in new tariffs "will be to raise prices on consumers and tax American business and manufacturers," Walmart said in the letter. "As the largest retailer in the United States and a major buyer of U.S. manufactured goods, we are very concerned about the impacts these tariffs would have on our business, our customers, our suppliers and the U.S. economy as a whole."

In an interview last Thursday, Gap Inc. CEO Art Peck told Bloomberg's Emily Chang, the company is watching the trade situation closely, but implications are not as great for Gap because apparel is not on the list. The company has spent years diversifying its manufacturing plants across many countries. But Peck said a jump in prices would eventually hit the consumer's wallet as a result of President Trump's trade wars.

So from now until the rest of the year, retailers will factor in about 10% tariffs. But when 2019 comes around, the tariffs are set to rise to 25%. "Should an agreement between China and the U.S. not be found before the New Year, retailers could well start 2019 on a gloomy note," Saunders warned.

An all-out trade war between the US and China is emerging as the most plausible scenario for 2019 and beyond, a risk that could severely impact US retailers and the American consumer.

Fonte: qui

Corporate Insiders Are Selling Stocks At The Fastest Pace In 10 Years

Why are corporate executives, officers and directors making such a mad dash for the stock market exits all the sudden? Here’s some insight…

by Michael Snyder of The Economic Collapse Blog

A lot of things are starting to happen that we haven’t seen since the last recession.  A few days ago, I wrote about the fact that home sellers in the United States are cutting their prices at the fastest pace in at least eight years, and now we have learned that corporate insiders are selling stocks at the most rapid pace in ten years.  So why are they dumping their shares so quickly?  Do they know something that the rest of us do not?  Certainly nobody can blame them for taking advantage of the ridiculously high stock prices that we are seeing in the marketplace right now.  But stock prices have been very high for a while.  Why is there such a mad rush for the exits all of a sudden?  According to CNN, corporate insiders have sold 5.7 billion dollars worth of stock so far in September…

CEOs are using the market boom to quietly cash in their own chips.

Insiders at US companies have dumped $5.7 billion of stock this month, the highest in any September over the past decade, according to an analysis of regulatory filings by TrimTabs Investment Research.

It’s not a new trend. Insiders, which include corporate officers and directors, sold shares in August at the fastest pace in 10 years as well, TrimTabs said.

It would be one thing if September was an anomaly, but the fact that insider shares were being sold so rapidly in August as well indicates that this is a clear trend.

Could it be possible that these corporate insiders believe that the market is about to take a tumble?

Of course it doesn’t exactly take inside information to see the writing on the wall.  On Wednesday, the Federal Reserve raised interest rates for the third time in 2018.  Overall, this is the Fed’s eighth interest rate increase since 2015, and it looks like the Fed is anticipating three more rate hikes in 2019…

Looking ahead to 2019, Fed officials expect at least three rate hikes will be necessary, and one more in 2020.

“The Fed shows no signs of taking (a) breath in rate hikes,” Robert Frick, corporate economist with Navy Federal Credit Union, wrote in a research note.

This is terrible news for stock market investors, because every rate hiking program in the history of the Federal Reserve has ended in a stock market crash and/or a recession.

In fact, since 1957 there have been 18 rate hiking cycles, and every single one of them has ended in disaster.

So do you think that we are going to beat the odds this time?

After raising rates again, the Fed released a statement in which it said that it expects the U.S. economy to grow “for at least three more years”…

The Fed sees the economy growing at a faster-than-expected 3.1 percent this year and continuing to expand moderately for at least three more years, amid sustained low unemployment and stable inflation near its 2 percent target.

“The labor market has continued to strengthen … economic activity has been rising at a strong rate,” it said in its statement.

You can believe that if you want, but it is also important to remember that Federal Reserve Chairman Ben Bernanke assured all of us that a recession was not coming in 2008.

And later we learned that the moment when he made that statement a recession had actually already begun.

Needless to say, investors were not thrilled by Wednesday’s rate hike, and the Dow Jones Industrial Average dropped another 100 points.  Stocks have really struggled this week, and we continue to get more disappointing news from the real economy.  On the heels of a “disappointing” existing home sales report, we just received news that new home sales missed expectations…

Following existing home sales disappointment, hope was once again high for a bounce in new home sales in August but once again disappointed with a 629k print (up from a revised 608k), but missed expectations of 630k.

While the sales gain was the first in three months, the downward revisions to prior figures indicate that the market in recent months was slower than previously reported, adding to broader indications of cooler demand in residential real estate.

And the trade war continues to take a toll as well.  According to Ford’s chief executive, the metals tariffs are going to result in a billion dollars in lost profits for his company…

Ford CEO Jim Hackett told Bloomberg Television on Wednesday that his company faces $1 billion in lost profits from President Donald Trump’s tariffs.

“The metals tariffs took about $1 billion in profit from us – and the irony is we source most of that in the U.S. today anyways,” Hackett said. “If it goes on longer, there will be more damage.”

Perhaps this is one of the main reasons why it looks like Ford could soon be laying off thousands of workers.

The “smart money” is always one step ahead of the “dumb money”, and corporate insiders have a much better view of what is really going on inside their companies than any of the rest of us do.

So if they are collectively convinced that now is a perfect time to sell, that is a major red flag.

On Wall Street, actions speak much louder than words, and corporate insiders are sending a very loud message by selling so many of their own shares.

About the author: Michael Snyder is a nationally syndicated writer, media personality and political activist. He is publisher of The Most Important News and the author of four books including The Beginning Of The End and Living A Life That Really Matters.