A recent report by UBS indicates the trade war that has been accelerating between the United States and China could have significant impacts on a variety of industries, resulting in price increases on toys, clothing and much more. There are also concerns it could lead to widespread store closures.
The study from the investment bank indicated that tariffs placed by the Trump administration on Chinese imports could jeopardize about $40 billion worth of sales, and could put about 12,000 stores at risk of closure during the course of the year. The tariffs are devastating for brick and mortar stores, which had already been seeing some increasing struggles with the continuing rise of ecommerce. The 25 percent tariffs placed on many Chinese goods could increase expenses to the point where widespread closures could become a reality sooner rather than later.
No signs of slowing down
Unfortunately for owners of these brick and mortar retail stores, there are no signs that the Trump administration is going to ease off on the tariffs any time soon. In fact, quite the contrary: just weeks ago, the administration increased tariffs on $200 billion in Chinese imports from 10 percent to 25 percent. President Trump has also threatened to add an additional 25 percent tariff on the other $325 billion in goods coming from China.
In an April report, UBS had also estimated that about 20,710 clothing stores alone would close by 2026 due to ongoing financial challenges. There’s a possibility that the tariffs could cause more than half of these closings in just a single year. These numbers also only account for publicly traded companies—they don’t even include smaller, private companies and many “mom and pop” retailers.
There are other retailers outside of the clothing industry that have already been forced to close a significant number of stores this year. CVS, Victoria’s Secret and Payless have shuttered about 6,500 stores combined. On the whole, there have been more closings in the first 20 weeks of 2019 than in all of 2018, which saw 5,864 closings, including all Toys R Us locations, and hundreds of Sears and Kmart branches. The most closings tracked in a single year by UBS was 8,139 stores closed in 2017. The firm estimates 12,000 or more stores could be closed by the end of 2019, in large part due to these tariffs.
Obviously, with the increased prices and the increased frequency of store closings, the tariffs will not exactly help out the state of the stock market, either, which has seen some significant fluctuations over the last couple years as the new administration has frenetically added tariffs, made huge tax cuts and taken other executive actions.
To learn more about some of the ways the Chinese tariffs can be expected to affect businesses and the stock market over the course of the rest of the year, we encourage you to contact Gold Wealth Financial today. We’ll be happy to answer your questions and explain why this may be a great time to get into gold investing!
- by Steve Hunt
Categorised in: Gold Investing