Bussiness
What Trump’s win means for retail giants like Walmart, Target, and Costco
- Trump’s second term likely means changes are on the way that will impact retailers.
- Experts say tariffs are top-of-mind for many companies and would represent new costs for consumers.
- Meanwhile, tax cuts may spur spending, and regulators could have a softer touch on mergers.
Donald Trump’s return to the White House is likely to usher in sweeping changes that will impact retailers like Walmart, Target, and Costco — ranging from new tariffs to tax cuts and a new regulatory environment.
Trump’s campaign promises, along with his prior term record, offer some insights into what major retailers can expect from his second term.
In the lead-up to November 5, companies including TractorTractor Supply Co., Best Buy, and Dick’s Sporting Goods said on their earnings calls that the election contributed to a generally more cautious US consumer.
However, the unambiguous election result should comfort retailers heading into the critical holiday shopping period.
“Elections are very distracting for the consumer,” Global Data retail analyst Neil Saunders told Business Insider. “It’s not massively bad, but it’s just not helpful for consumer confidence and the consumer attention.”
“Retail wants really a clear victory — whichever way,” he added. “Then they can understand the policies and how to react, and then the consumer can start focusing on the holidays and opening their wallets.”
Walmart, which operates thousands of stores in red states and blue states alike, was measured in its outlook in an August earnings call.
“Good thing about elections is they come along every four years and we get to have a lot of history with seeing the impact of that,” Walmart CFO John David Rainey said.
With Election Day in the rearview, here are four key areas that retailers will be watching closely during this transition period.
Tariffs are the biggest question
Top-of-mind for many companies right now is the question of tariffs, experts said.
If Trump follows through on his campaign proposals of 10%-20% tariffs on most imports and 60-100% tariffs on goods from China, it would mean significant change to the way retailers do business.
“It would be a massive upheaval to most of the cost structures for these companies,” said Chris Walton, a former Target executive and founder of Omni Talk.
Given the expense of reorganizing supply chains, large retailers are still in the research phase rather than committing to a new strategy, Walton said.
While retailers may absorb some of the costs associated with tariffs, US households would likely lose up to $78 billion in spending power per year, according to analysis from the National Retail Federation, a lobby group representing the industry.
“A tariff is a tax paid by the US importer, not a foreign country or the exporter,” said NRF’s vice president of supply chain and customs policy, Jonathan Gold. “This tax ultimately comes out of consumers’ pockets through higher prices.”
Still, Johns Hopkins business professor Tinglong Dai said the retail industry has handled prior rounds of tariffs without too much disruption to prices or the flow of essential goods.
“Retailers have become incredibly adept at absorbing these frictions,” he said.
“You can say it’s a negotiating strategy and it won’t actually come to pass, or you can say will come to pass, maybe in a diluted form and not that severe, but it’s causing a lot of nervousness,” Saunders said of Trump’s proposals.
Taxes matter, but take time to see results
Trump is expected to extend his 2017 tax cuts, which are scheduled to expire next year. He’s also likely to cut corporate taxes further, backed by his supporters in the House and Senate.
Saunders said tax cuts will lead to more disposable income for consumers, which could lift spending.
“The whole of retail is very dependent on the middle class and what you can eke out of their spending levels,” he said.
Any changes to the tax code are likely to be less disruptive than tariffs since they will take many months to flow through the economy.
Plus, retailers routinely manage tax changes at every level of government from local to national, Walton said.
“What’s different,” he added, “is this is of a size and scope that the retail industry hasn’t seen in 100 years.”
Immigration presents a mix of challenges
Past studies from the Pew Research Center suggest that relatively few of the retail industry’s 15 million employees are living in the US illegally, so a crackdown on illegal immigration wouldn’t likely complicate retailers’ hiring efforts.
Still, a widespread deportation effort could negatively impact people throughout the company, as well as customers and communities.
“Everyone’s gonna feel the brunt of that,” Walton said. “If that were to happen, it’s a tough thing to prepare for, because the collateral damage from it could be pretty expensive.”
A more pressing concern, Saunders says, is a tightening of legal immigration, including the H1-B visa program for skilled workers, including the tech talent that giants like Amazon, Walmart, and Target increasingly rely on.
“That’s actually very unhelpful for a lot of retailers, especially in areas like technology, which a lot of retailers are involved,” he said.
Other experts told BI that concern over national security and the availability of workers is far different from eight years ago, which could persuade Trump to soften his position.
Regulation down, deals up
Federal Trade Commissioner Lina Khan, who has launched investigations into corporate price-gouging, will likely be one of the first to go under a new Trump administration, Saunders said.
In place of her aggressive antitrust posture, a more deal-friendly FTC is likely to emerge, he added.
Mergers like the one proposed between Kroger and Albertsons could find a more receptive audience in Washington, and other consolidations may soon follow.
While a Republican administration is usually considered to be more business-friendly, Walton said it might not always be so straightforward under Trump.
“It can wax and wane to whatever the flavor of the month is in terms of where his administration wants to focus or who he wants to benefit,” he said.