Trump’s War On Retail Roars Into 2023

The 117^th Congress of the United States has completed their business, and their two-year term has ended. Some members have vacated the building, and any tag-along legislation (destined for the lame duck session) has been eviscerated. In truth, the 117^th Congress must be lauded for their significant and bipartisan achievements but, sadly, they didn’t provide any real retail assistance to help adjust and correct on-going sourcing and supply chain issues. What started a few years back as a Trumpian assault on retail – has now accelerated completely through the first two years of Team Biden. This situation has resulted in consumer inflation, additional retail bankruptcies, supply chain problems, and a Holiday retail season that will be long on sales and short on profit.

As America enters 2023 (and the first three months of the new 118^th Congress), little will likely be accomplished. This biannual adjustment happens because bills from the last session have automatically expired, and they need to be re-introduced. All of this is a time consuming process, and retail trade issues will linger until at least April or May of 2023 – before the Republican House majority can reign them in (if they choose to do so).

What ever happened to critically important idea that Congress would renew the Generalized System of Preferences (GSP) legislation or the Miscellaneous Tariff Bills (MTBs)?

What happened to requested early renewals of Haiti HOPE-HELP legislation, or the African Growth & Opportunity Act (AGOA)?

What happened to getting some Tariff relief?

Americans may know little of these programs but, for sure, consumers don’t want to pay more for basic clothing needs – especially in a time of spiraling inflation. It is fair say that the federal government does know how to connect into retail checking accounts – to extract additional tariff charges in the form of non-essential taxes. The bill for these extra tariffs was recently estimated at $3.8 billion a month (noted by the Tariff Misery Index by Americans for Free Trade).

Looking back on trade history, from his early business days, former President Trump always enjoyed a good fight. However, when he decided to go after China, the call was probably too broad and some people became ensnarled in the adage that all China trade is bad, when that was clearly not the case. President Biden called it right – when he looked at China and said: “We’re going to compete vigorously, but we’re not looking for conflict.” To that point, American retailers definitely want to sell product into China, and they also want (and need) to source product from China. When roadblocks to trade (like tariffs and like the loss of GSP) remain in place, they block progress and raise consumer cost. The trade roadblocks that have been issued, and lack of corrective Congressional action – is akin to complaining about a bad haircut, and then asking the stylist to charge you more for the same thing – which spirals the cost and doesn’t change the result.

In June of 2016, a well-attired candidate Trump boarded the escalator at Trump Tower along with his stunning fashion-model wife and retailers were hopeful for an American fashion era escalation. After all, Presidents were known to change the landscape by the way they dressed. It was acknowledged that President Harry Truman previously owned a haberdashery store and was meticulous about his clothes, and Jackie Kennedy was considered the essence of American fashion. However, with all this anticipation, attentive retailers watched the Trump Family on the escalator that first day, and took note that no one was carrying any shopping bags – that’s when the fun began!

Mega-department store Macy’s, who had been selling Mr. Trump’s fashion line, took offense to the candidate’s opening campaign remarks, and issued a statement discontinuing their Trump fashion business. A fearless candidate Trump fired back at the retailer (via Twitter) saying: “people who believe in border security, halting illegal immigration, and better trade deals should boycott Macy’s.”

The Macy’s debacle eventually subsided and department store Nordstrom took their turn in the hot seat. Trying hard not to be even slightly political (by citing poor sales), the Nordstrom team announced that they would drop the Ivanka Trump Brand for the coming spring season. Candidate Trump once again took to Twitter and said that: “his daughter had been treated unfairly by Nordstrom.”

Perhaps Mr. Trump had it in for Macy’s and for Nordstrom, but he clearly liked other fashion retailers, especially if they also carried food products in addition to clothes. As the federal guidelines for “essential” businesses came into play during the COVID shutdowns – is amazing to many that gun store retailers, shooting ranges, pet stores, and liquor stores were allowed to remain open, but a retail business that only sold shirts, socks, underwear, pants, shoes, and dresses were described as non “essential” and were closed. Some retailers gained significant ground and a competitive advantage during this period, while other retailers were severely burdened.

When it came time for President Trump to take aim at China trade, he was cautioned by retail industry leaders to stay far away from disrupting the American consumer. It was clear to the retail community that any additional tariffs (taxes) could easily spark inflation – as cost multiplies within the supply chain.. The former President’s White House advisors (at the time) were described as globalists or nationalists and tariff discussions became their menu-du-jour. The entire China trade issue was positioned under the concept of reducing the trade deficit with China, and framed as a fight to protect intellectual property and the transfer of technology (Peter Navarro’s 7 deadly sins). In fact, the deficit reduction premise was faulty from the start. History reminds us of the great economist Adam Smith who said: “nothing can be more absurd than the whole doctrine of the balance of trade.”

During the Trumpian inspired trade war that was intended to correct all these issues – China actually bought less of our exports and America bought more imports – which, in effect, widened the gap instead of decreasing it. In an effort to level the playing field and help our farmers (who were losing significant export income), former President Trump eventually took $28 billion of the tariffs collected from American retail consumers and gave it to the farmers to cover some of their losses.

At the City University of New York, in July of 2019, (then) candidate Joe Biden laid out his thoughts on trade with China when he said: “President Trump may think he is being tough on China, but all he has delivered is more pain for American farmers, manufacturers, and consumers. His Economic decision making is as short-sighted as the rest of his foreign policy. China is playing the long game, extending its global reach and investing in technologies of the future, while Trump is designating our closest allies, from Canada to the European Union – as National Security Threats in order to impose damaging and pointless tariffs.”

This whole story tells some the complex tale about the state of international trade affecting retail and the curious alignment of two concurrent administrations. While former President Trump may have lit the retail trade fuse, current President Biden hasn’t yet solved the problems. During the first two years of Team Biden, an otherwise productive 117^th Congress – actually failed to change course on trade and improve the suffering that plagues the retail community.

In 2023, here is a partial wish list that would help retail and improve our standing in the world of international trade:

*renew the Generalized System of Preferences (GSP)

*renew the Miscellaneous Tariff Bills (MTBs)

*stop weaponizing trade deals as a means to solve political disputes (example Ethiopia)

*renew the African Growth & Opportunity Act (AGOA) before it expires in 2025 – so that long term investments can continue

*renew HAITI preference deals (HOPE-HELP) before they expire in 2025 – so that long term investments can continue

*stop manufacturing clothes in Federal Prisons under the UNICOR program and give those orders (which are mandated to be manufactured in America) to private enterprise

*reform the Section 321 de minimis program to allow USA based Foreign Trade Zones (FTZs) to ship direct to consumer (DTC) with program benefits

*remove the Trump-era Tariffs – especially on apparel, footwear, and accessories

*negotiate new Trade deals – to help open up global sourcing alternatives

A corrective course for the industry needs to be initiated, and the retail trade inaction of both the current administration and former the 117^th Congress remains reminiscent in a version of the Aesop fable about nothing getting accomplished:

The old miller and his young son were walking their donkey on a long dirt road from their farm to the town market, intending to offer their prized animal for sale.

A group of children walked by and thought it was odd that no one was riding on the donkey.

The old miller listened to the children and put his young son on the animal as he continued to walk to the market.

Further down the road, a group of old people stopped the old miller and suggested that he should be the one riding on the donkey, and that his young son should be walking – so the two switched places.

Even further down the road, a group of travelers stopped the miller and mentioned that if his intent was to sell the donkey in the market, riding the animal could make it exhausted and thus, the donkey would be more difficult to sell.

The old miller and the young son decided to carry the donkey into town.

As they arrived and began to cross the river bridge that led to the market, the townspeople laughed very loudly when they saw the old miller and his young son carrying the donkey. Unfortunately, the noise upset the donkey and the animal kicked very hard.

Sadly, the donkey fell off the bridge into the river, where it drowned.

The old miller and his young son went home feeling sad, with no gain from their effort.

The moral of this tall tale is that: if you try to please everyone; if you listen to many voices; you are more likely to achieve nothing.