Retail CEOs Gird for Trump's Tariff Storm, Leveraging Diversification and Negotiation Tactics
Davos, Switzerland - Retail executives are better prepared to navigate impending tariffs as President Trump re-enters the Oval Office.
According to Williams-Sonoma (WSM) CEO Laura Alber, the industry has reduced its reliance on China by 50% since the first Trump administration. "We have diversified our supply chains," she said at the World Economic Forum (WEF) in Davos.
Negotiations with suppliers have also become more commonplace. "Vendors will help us mitigate tariffs to retain our business," Alber added.
Trump's proposed 10% tariff on Chinese imports, effective February 1, and threat of 25% duties on Mexico and Canada imports have raised concerns. Joe Feldman of Telsey Advisory Group believes retailers will need to increase prices within three to six months if the tariffs are implemented.
Williams-Sonoma sources 25% of its products from China but manufactures furniture in the US, providing a significant advantage in meeting customer needs.
Apparel giants Ralph Lauren (RL) and Gap (GAP) have also diversified their supply chains. Ralph Lauren CEO Patrice Louvet said China's contribution to their sourcing has fallen to "low-to-mid-single digits."
Gap CEO Richard Dickson emphasized the company's focus on value and developing new product markets. The retailer's supply chain is spread across Southeast Asia, Central America, Europe, and India.
While retailers anticipate price increases, inflation has made it more challenging to pass on the costs to consumers. Dylan Carden of William Blair estimates a 25% duty on apparel could lead to a 5% to 10% increase in consumer prices.
Despite challenges, retailers remain confident in their ability to navigate the uncertain environment.