Reports of a proposed US border-adjustment tax, which aims to tax imports but offer a rebate for exports, have affected the share prices of a number of US retailers overnight.
Many retailers - particularly clothing and fashion retailers - rely on Asian and Middle Eastern suppliers for their products. Fast fashion has been modelled on this structure, and consumer demand has driven prices down.
Can US manufactured goods compete? Certainly in the short term, there will be a huge pressure on retail margins whilst retailers adjust their supply chain and product accordingly.
This may just lead to a greater push to online sales, away from stores, for retailers to reduce costs to their bottom line.
Several major retailers saw their shares sink on Thursday afternoon after Reuters published an interview with Mr Trump discussing the proposal. All of those companies are part of a trade group, Americans for Affordable Products, which was created recently to oppose a border-adjustment tax said to be under consideration by Mr Trump and Republican lawmakers, who have pledged to push a tax reform plan this year as part of Mr Trump’s pro-growth agenda. While the details of such a proposal are not yet available, a border-adjustment tax – a form of which have been adopted by numerous countries – would tax imports while offering a rebate for exports, proving a net boost for domestic manufacturers while weighing on those that rely on goods made cheaply overseas. Among the industries most likely to be impacted are apparel and consumer-goods companies.