National Retail Federation President Matthew Shay joins Yahoo Finance Live to discuss investor uncertainty, eliminating tariffs to slow inflation, rate hikes, and the outlook for the stock market.
RACHELLE AKUFFO: Well, as retailers get back up to pre-pandemic operation levels, many big box chains are still struggling to understand what consumer demand looks like in 2022. Surplus inventories and shifting trends have created more complications for stores and consumers already hurt by inflation.
Well, here to discuss the state of retail is National Retail Federation president and CEO Matthew Shay. Now, we have seen that the National Retail Federation has urged President Biden to cancel Trump's China tariffs. This bipartisan group of senators, including Mitt Romney and Elizabeth Warren, they want him to keep them in place. What is your take on this?
MATTHEW SHAY: Well, [? Rochelle, ?] I think the numbers tell the story. And you've been talking about those numbers these last couple of segments. Inflationary prices are really starting to bite across the board, at all income levels. The survey work that we've done shows that 58% of all Americans are dipping into savings or taking on debt to meet their expenses and 72% of Americans at lower income levels, households at $25,000 a year or below, are taking on debt or borrowing money to meet their expenses.
So this is really starting to hurt. And I think we believe that we ought to take a holistic approach to fighting inflation. And that's why we launched our Lower Inflation Now campaign. And among the things that we think we should be doing, in addition to addressing supply chain challenges and working on hopefully getting the Ocean Shipping Reform Act passed later today, which the House has passed now, going to the president's desk, we think we ought to remove the tariffs. That's a $300 billion tax on consumer goods.
China is not paying for those. We said this in 2018, when the previous administration put them on. Tariffs are a tax. They're not a long-term solution to trade relationships. There are other ways to address our trade relationship with China that don't have the same negative consequence for American consumers. And if we really believe that we should do this, then this amounts to a $1,200 a year tax on American households. Well, the president can remove that with a stroke of a pen. We think that would be a good place to begin.
SEANA SMITH: Matthew, from the conversations that you're having, certainly there has been more and more talk about scaling back or removing the tariffs all together. Are you more confident? Do you think we actually will see change, and change soon?
MATTHEW SHAY: Well, Seana, I don't want to predict what kinds of conversations are taking place inside the administration. I think we can all look at what the data is telling us, and we ought to be doing everything we can to support American households and working families and consumers. And this is something that we can do.
There are other things that we can do, as well. We think the Ocean Shipping Reform Act is going to provide some relief, give the Federal Maritime Commission real authority to intervene with the very small number of ocean carriers that extract a lot of costs from shippers that gets passed on to the rest of the economy. We ought to do that. So there are a variety of things we can do.
Some of them are going to take longer than others to really show up in economic activity. But the consumer sentiment numbers we're seeing I think should give us all pause, and to recognize, based on that survey data that I mentioned a minute ago, 72% of those households at the lower income levels taking on debt, that's not sustainable over the long term to help meet their expenses. And so I think we ought to be doing everything we can to send some relief in the direction of those households.
- Matthew, not many things can bring together the unlikely alliance of Mitt Romney and Elizabeth Warren, but these China tariffs have. They're part of a bipartisan group that say you have to leave these tariffs in place. They say, in part, it'd have little, if any, effect on inflation, but they also say it'd be a surrender to China and send more American factories and jobs there. What's your reaction to that group of senators?
MATTHEW SHAY: Well, Dave, I guess I'd say that there are times when political interests and economic necessities are aligned and there are times when they are not. And in this case, with respect to those that are opposing lifting these tariffs, I'd say they've got political reasons to do that, whether they want to bash China or curry favor with labor unions here, support a more protectionist approach to various domestic industries, whatever the case may be. But tariffs are not a good long-term way to manage a trade relationship.
Tariffs, number one, are not designed to be put in place on a permanent basis. Tariffs are supposed to be temporary. They're a stick. They're not a carrot. They're not very constructive, other than getting someone's attention. They end up creating retaliatory behavior on the part of those that are being tariffed. So I mean, if we're going to really address this in a long-term, strategic, holistic way, we should be back to the table with all of our partners in the Asia region, working together to create a contemporary version of something like TPP that was proposed a few years ago, but let's have a multilateral approach to this relationship, as opposed to a singular approach.
And tariffs, while they have a role to play, I think that time has come and gone because it's not bringing about the kind of behavioral change that I think people hoped it would. And the impact has been negative for American consumers. And the longer this goes on, the longer we're going to pass those costs on and that tax increase to Americans. And in the current environment, it just doesn't make any sense.
RACHELLE AKUFFO: And obviously, when you have this rate raising environment, you also have, as you mentioned, the tariffs still in place, but we are seeing some of these luxury retailers doing better than, say, some of your Walmarts or even some of these smaller retailers. What is the story in terms of how they're having these very differing experiences with these same conditions?
MATTHEW SHAY: Yeah, Rachelle, I think it goes to the sort of-- the bifurcation or the segmentation that's taking place among consumers. It was one thing-- and the 2021 economy seems so long ago now-- when everyone was spending. And virtually across the board in the consumer sector, if you were in business there, you had an opportunity to be engaged in the market and generate sales and profitability. Now, things are getting more challenging for consumers at different income levels. And that translates into different experiences for retailers, in this case, that are serving different segments of our economic market.
And so in general, historically, the luxury brands, the higher-end retailers, obviously they cater to a different kind of consumer. Those consumers are generally concerned with sort of what does the stock market look like. Maybe this isn't a good day to have that conversation, but in general, they're spending off the balance sheet, so to speak, as opposed to spending on the income statement.
Whereas those consumers at different, maybe lower income levels are much more impacted by commodity prices, by energy prices, the things that are more regressive in terms of taking a larger portion of their income. And so they're more sensitive to day-to-day price changes, as well as spending based on their paychecks. And if their paychecks aren't keeping up with the increase in the cost of the things they're buying, then that requires them to take on debt, borrow money, do some-- tap into savings, the things that we're seeing happen right now.
RACHELLE AKUFFO: Indeed. Some disturbing trends indeed. Thank you so much. Matthew Shay there of the National Retail Federation. Thank you for joining us.