While talking heads on each end of the political spectrum debate the impact of additional tariffs on Chinese imports, I take a middle-of-the-road approach. I believe U.S. retailers will innovate by changing up and tweaking their business plans to operate and ultimately succeed in a more challenging economic environment.
I will say a looming tariff increase does create uncertainty, and corporations, particularly big-box retailers, are busy assessing financial impact, trimming profit outlooks, and planning more conservatively. They’re also looking to suppliers to help absorb increased costs and are exploring sourcing from other countries. I also believe that because Chinese imports sold in the U.S. have substantial profit margins, businesses are more likely to cut margins rather than pass the cost to consumers.
Unfortunately, extremely lean, low-margin businesses will feel the heat more than larger, higher-margin, corporations. Low-margin companies have less margin flexibility and will rely more heavily on suppliers and consumers to shoulder additional costs. Still, even in this case, a price increase will be a measure used in combination with an assortment of cost-absorbing tactics, and in no way will create the doom-and-gloom economic scenario some pundits predict.
Navigating uncertainty and staring down challenges is what successful American businesses do. Chinese import tariffs may sting, but a determined, entrepreneurial spirit will continue to spur long-term success for companies that have healthy margins; while creating a challenging environment for companies that have tighter margins and price-sensitive consumers.
Chad Van Horn is the founding attorney and managing partner of Van Horn Law Group, P.A.,the largest bankruptcy law firm in Broward County, Florida, based on cases filed.* For more information, call (954) 765-3166 or visit https://www.vanhornlawgroup.com.
* Visit www.pacer.gov for statistics.
