Market Overview

Will The Trade War Escalation Impact Consumers? Depends Which Pro You Ask

Will The Trade War Escalation Impact Consumers? Depends Which Pro You Ask

The escalation of the Sino-American trade war is likely to impact consumers although the weakening of the Chinese yuan should mitigate the impact of U.S. tariffs, Stacey Widlitz of SW Retail Advisors told CNBC Monday.

Currency Uncertainty

At a macro level, a weaker yuan cancels out a higher tariff — but the impact at the retail level isn't the same, Widlitz said.

Retailers price products on the shelf in part based on fluctuations in currencies, which adds a layer of uncertainty to pricing, she said.

For the most part the topic of tariffs has dominated headlines, so consumers expect to see higher prices in stores — but Widlitz said it is unclear just how much of an increase can be tolerated.

Many consumers are likely looking at these concerning headlines and buying many items ahead of what could be large sticker price increases, she said.

Retailers are prepared, as many exited the first quarter with large amounts of inventory and making it clear they will become increasingly promotional, Widlitz said. 

Retail Exec: 'Greatly Exaggerated' Pain

The financial pain consumers will suffer from tariffs and trade wars is "greatly exaggerated," former Toys R Us CEO Gerald Storch told Fox Business News Monday.

The top priority for retailers to mitigate any sticker price increase is to go back to their suppliers and simply renegotiate new terms, he said. This shouldn't prove to be a "difficult" conversation given the recent devaluation of China's currency, the former CEO said. 

Retailers can also look outside of China for a new stream of products, Storch said. Companies that are unable to either renegotiate terms with Chinese suppliers or shift production outside of China will need to raise prices.

The math behind the latest round of trade war escalation is minuscule in the grand scheme, he said. 

The new 10% tariff on $300 billion in Chinese goods doesn't begin to compare to total consumer spending in the U.S. of $14 trillion, he said. At best, consumers will pay "a few tenths of 1% at most — if anything at all," Storch said. 

"I'm not saying its good, but I think the effect is exaggerated." 

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Posted-In: China CNBC Fox News Business Gerald StorchAnalyst Color News Analyst Ratings Media Best of Benzinga


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