Expect to spend more money this year for back-to-school shopping — and tariffs will be to blame.
As trade tensions between the United States and China continue to loom and the U.S. threatens 25% tariffs on $250 billion of Chinese imports as well as tariffs on imports from other countries like Vietnam and India, retailers will eventually show signs of weakness especially as they begin to report second-quarter earnings.
“The American consumer doesn't like feel it yet, but think about this, 25% — simple math, 25% [of] $250 billion,” American Apparel and Footwear Association CEO and President Rick Helfenbein told Yahoo Finance’s On the Move, “That's $475,000 a minute coming out of the economy, and somewhere along the line it's gonna bite the consumer. It's certainly biting on margins because retailers are caught between a rock and a hard place.”
Helfenbein said retailers are already raising prices where they can. But when will consumers start to notice a price hike? Helfelbein pinned the back-to-school shopping period.
“Truthfully, April and May are weak months for shipping and June is not. That's when you start shipping back-to-school,” he explained. “So, where it could be a quarterly decline, overall still a lot of goods coming in. And they are raising prices and you will see it in the back-to-school season. For sure you're gonna see it in the holiday season. There's no way around it.”
The National Retail Federation expects a record year for back-to-school shopping in 2019. A total combined $80.7 billion dollars is predicted to be spent for back-to-school and back-to-college, according to the organization. The NRF is also predicting families with children in elementary school through high school will spend an average of $696.70 — which is up from last year’s prediction of $684.79.
“We’ve managed so far to skirt disaster, but we’re running out of tools in our toolbox,” said Helfenbein, adding that when it becomes impossible for retailers to make their numbers, “you’re either going to sell less or you’re gonna have to charge dramatically more. It’s going to create this scenario, which I unfortunately call ‘retail ugly.’”
Chelsea Lombardo is a Production Assistant for Yahoo Finance. You can find more of her work here.