New Wave of Tariffs Expected to Rock U.S. Retail

Tariff Hikes Spark Market Reaction and Industry Concerns

President Trump escalated the global trade war by announcing surprise tariff increases on Chinese and Canadian goods. The announcement led to immediate financial market volatility, with the Dow Jones dropping nearly 1,700 points and major retailers taking a hit—RH (Restoration Hardware) plummeted 40%, while VF Corp., Wayfair, and Gap also suffered steep declines.

Retailers Scramble to Adjust Sourcing and Strategy

Many U.S. retailers had already begun reducing reliance on China, but new tariffs on imports from Vietnam threaten to undercut those efforts. For example, Target has decreased sourcing from China from 60% to 30%, with a goal of hitting 25%. Companies like Macy’s and Target claim they are prepared, having ramped up inventory and renegotiated supplier terms over the past year.

Despite preparations, analysts warn that these moves won’t fully protect earnings. Some retailers will pass increased costs to consumers, while others plan to absorb them through slimmer margins. This could result in higher prices for goods like electronics, home furnishings, and apparel, particularly impacting Best Buy, RH, Walmart, and other major chains.

Retail Real Estate Faces Growing Uncertainty

Although the U.S. retail vacancy rate remains low at 4.2%, experts warn that the evolving trade environment could pressure tenant behavior and leasing strategies. With tenants becoming more cautious, demand for retail and industrial space may soften.

Real estate professionals remain uncertain about the long-term impact, though some believe the administration may pull back on tariffs if economic consequences intensify. Nevertheless, trade groups emphasize that small retailers and the apparel sector are likely to suffer the most, lacking the financial flexibility to absorb cost increases.

Source:CoStar