The economy tightens, election day approaches – and retail pundits wonder if trade policies developed by the Team-Biden are working for or against the retail community. The Biden strategy has been to protect “labor” at all costs, but perhaps they miss the bigger picture and perhaps they have self-created international trade strategies that are increasingly regressive. You can’t, as trade policy, tell fashion retail buyers to vacate China – and block the exit doors at the same time. That’s just not how it works, and that’s what traders believe is happening today.
For months, the Federal Reserve worked feverishly to ban the word “transitory” from their lexicon. However, they left it in place long enough to do serious damage to America’s retail economy. Inventory, procurement costs, and inflation are sky-high – which has pushed the retail industry, once again, back into the no-fly zone. Government could help if they want to, but they deny and deflect any thought that there are issues with international trade.
Declining sales and weakening foot traffic are a bad sign, and layoffs – even worse, but consumer confidence did tick up in August (after a three-month decline) and several forecasts indicate that retail might be able to hold up through the Holiday season. However, operating costs are increasing and excess inventory needs to be sold off, so it’s anybody’s best guess the Holiday season will pan out and earnings will (of course) remain questionable until the final tally is in.
Looking at the bigger picture; former Team-Trump was a tough ride when it came to international trade. They had purpose and direction – even if they were (often) emotional and (at times) mis-guided. Team-Biden, on the other hand, is slow to react – or just plain stubborn on the trade issues. Their consistent non-activity is now having a negative effect on the retail community. At some point, the government will remember that consumer spending represents 70% of our national GDP, and everyone hopes that federal realization will come sooner versus later.
It does remain clear that the Administration has a plan to divert USA purchasing power away from China, and that being said – when retail attempts to move, the government seemingly blocks the effort. To share examples; several fashion retailers invested heavily in Ethiopia to develop product, but Team-Biden pulled their African Growth & Opportunity Act benefits away. Retailers headed to Myanmar, but a military coup and threats to pull their Generalized System of Preferences benefits have dimmed their hopes. Some retailers headed to Nicaragua, but now there is now a fear that the government will pull their Central American Free Trade Agreement benefits. Some retailers headed back to America, but rising inflation and proposed state laws restricting factory piece rate have some domestic manufacturers concerned.
The newly passed Uyghur Forced Labor Prevention Act (UFLPA) also targets retail goods, and that legislation has importers scrambling – because inbound goods can be turned away at American ports and, if the shipment is questioned, the importer of record is deemed guilty (before innocent) and needs to prove validity withing 30 days. This change is forcing some branded importers to switch their import status from DDP (Delivery Duty Paid) to FOB (Free On Board) in order to avoid being the importer of record – pushing addition carrying costs, and liability back to the retailers. Today, as a reality check to the fashion business: 97% of all apparel is imported and 37% of fashion apparel comes directly from China. The U.S. Government, by the way, does allow shipments from overseas to individual consumers with a value of up to $800 per person per day under the Section 321 De Minimis Rule that is free of duty, free of the extra Section 301 China tariffs, and avoids customs inspection (in general…
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