Since 2019, many voters have seen their incomes slip further behind the increase in prices of goods and services. The candidate they elected, Donald Trump, plans to impose tariffs that could inflate prices of some consumer goods and reduce the stock prices of some retailers.
Investors could profit by betting on the decline in the stock prices of some companies in categories, such as “apparel, toys, furniture, household appliances, footwear and travel goods,” noted CBS News.
That’s because some of those retailers will pass along Trump’s planned tariffs by raising prices on the goods they sell — costing consumers “between $46 billion and $78 billion in spending power,” on such items, noted the National Retail Federation.
Examples include Five Below, Dollar Tree, Crocs, American Eagle, and Skechers. The tariffs will certainly complicate lives for the CEOs of these retailers. They will need to decide whether to
- Raise prices to maintain their margins as they pay the tariffs,
- Hold their prices to avoid losing customers,
- Reduce other costs to offset the tariffs, or
- Manufacture their goods in countries with lower or no tariffs.
Winners — such as AutoZone and Bath & Body Works are most likely to pass along the tariffs in the form of higher prices — while holding on to customers. Possible losers — such as Five Below and Dollar Tree — will not pass along the higher tariffs and are likely suffer a drop in profits.
How Economy Stopped Working For Many Voters
Many workers experienced an economic squeeze between 2019 and 2023, While the average wage increased 12% — from about $54,100 to $66,622, according to the Social Security Administration’s Average Wage Index, prices of significant family expenses increased far more.
Between 2019 and 2023, here are three of the largest expenses that increased and how much those expenses represented as a percent of average wages:
- Average monthly rent increased 38% and took a bigger bite out of wages to 37% in 2023. Average monthly rent rose from $1,483 in June 2019 to $2,047 in September 2023, according to Zillow. In 2019, a years’ worth of rent was $17,796 — or 33% of the average wage. By 2023, annual rent had risen to $24,564 — 37% of the average wage. The averages mask wide variations in rent as a share of wages by city and income level, Nerdwallet reported.
- Average transportation costs for a U.S. family increased 41% and took a bigger bite out of wages to 20% in 2023. The average transportation costs for a U.S. family increased 23% from $781 to $1,098 between 2019 and 2023, according the Bureau of Transportation Statistics. In 2019, a years’ worth of transportation cost $9,372 — or 17.3% of the average wage. By 2023, annual transportation costs had risen to $13,176 — 20% of the average wage. The averages mask wide variations in transportation costs as a share of income, BTS noted.
- Average price of grocery basket increased 23% and took 15.6% share of the average wage in 2023. The average price of a grocery basket increased 23% from $156.50 to $193.20 between 2019 and 2023, according to Statista. Assuming a family buys such a basket every week, the average grocery basket increased from $8,138 in 2019 to $10,046.40 in 2023 — while rising slightly from 15% to 15.6% of the average wage. In 2023, the lower a family’s income, the more it spent on food as a percent of income — from about 32% for the lowest quintile to 8% for the highest one, reported the United States Department of Agriculture’s Economic Research Service.
How Much Tariffs Could Increase Inflation
Tariffs — which U.S. companies pay to import goods from countries outside the country — will raise costs for businesses.
Businesses may choose to pass those costs onto consumers in the form of higher prices. Moreover, countries may choose to respond to the tariffs by imposing their own tariffs that could make U.S. goods more expensive to import.
Trump proposed to increase tariffs on all imports in the range of 10% to 20% on all of the $3 trillion in U.S. imports — with 60% “levies on imports from China,” according to National Public Radio.
One forecasting firm expects tariffs to boost U.S. inflation. Specifically, a 10% tariff would increase inflation by about 0.8 percentage points in 2025, forecasters at Pantheon Macroeconomics projected according to NPR.
Manufacturers could compare the costs of the tariffs to the costs of moving manufacturing to the U.S.. Economists expect the costs of bringing manufacturing back to the U.S. to be higher than the cost of continuing to offshore and to pay the Trump tariffs due to the “relatively high U.S. labor costs,” Pantheon economist Samuel Tombs told NPR.
To be sure, some think foreign companies pay tariffs. Trump has repeatedly contended that foreign companies would foot the bill, telling a gathering last month at the Economic Club of Chicago “the countries will pay,” according to CBS News.
That claim is not backed up by reality. “A consistent theoretical and empirical finding in economics is that domestic consumers and domestic firms bear the burden of a tariff, not the foreign country,” according to an October 2024 analysis from the nonpartisan Budget Lab at Yale University featured by CBS News.
In reality, the U.S. Customs and Border Protection receives tariff payments from American importers when their goods cross the border. Manufacturers are likely to pass their higher costs on to consumers — raising prices paid by the typical middle-income household to the tune of “$1,700 in increased taxes a year,” according to economists at the Peterson Institute for International Economics.
One company will surely be passing on the higher costs it pays due to Trump’s tariffs. “If we get tariffs, we will pass those tariff costs back to the consumer,” Philip Daniele, CEO of vehicle parts supplier AutoZone, told analysts in a September earnings call. “We’ll generally raise prices ahead of — we know what the tariffs will be — we generally raise prices ahead of that,” he added.
Some companies are moving production out of China and into other countries less likely to be affected by tariffs. “Obviously, coming out of the gate, there would be price increases associated with tariffs that we [would] put into the market,” Stanley Black & Decker CEO Donald Allan Jr. told CBS News recently. The company moved its supply chain to Mexico and other parts of Asia but is not likely to make goods in the U.S., Allan said.
Other companies ordered goods from China ahead of the election. The U.S. imported 11% more Chinese products in July and August than during the same two-month period in 2023, according to the Census Bureau.
How Tariffs Could Add To Prices
Higher tariffs could raise prices on many retail goods and services. Here are examples of how tariffs would raise consumer prices:
- Toaster price rises 25% — from $40 to $50 — the midpoint of the post-tariff ranged between $48 and $52, NRF noted.
- Running shoe prices rise 23% — from $50 to $61.50 — the midpoint of the range from $59 to $64, according to NRF.
- Mattress and box spring set price increases 8% — from $2,000 to $2,159 — the midpoint of the range between $2,128 to $2,190, the NRF said.
Consumers would pay billions of dollars more on a variety of goods:
- Apparel: $13.9 billion to $24 billion more;
- Toys: $8.8 billion to $14.2 billion more;
- Furniture: $8.5 billion to $13.1 billion more;
- Household appliances: $6.4 billion to $10.9 billion more;
- Footwear: $6.4 billion to $10.7 billion more; and
- Travel goods: $2.2 billion to $3.9 billion more, noted the NRF.
Which Companies’ Could Suffer A Drop In Their Stock Prices
Not all retailers will suffer a drop in their stock prices should Trump’s tariffs go into effect.
The tariffs will create winners and losers. The winners will be the companies with pricing power and popularity that import from countries not targeted by Trump’s tariffs. The biggest losers will be retailers importing heavily from China with limited pricing power.
The biggest losers could include Five Below, Crocs, Skechers, Amer Sports and American Eagle Outfitters which are at higher risk because they import more than 20% of their goods from China, according to a Bank of America research note from retail analyst Lorraine Hutchinson featured by CNBC.
Of these companies, the most at risk could be Five Below due to its lack of “the pricing power to mitigate hefty tariffs,” she wrote as she downgraded her rating on the retailer to underperform.
Another potential loser is Dollar Tree — whose “fixed-price-point business model makes it difficult to pass on higher prices to customers,” Piper Sandler senior research analyst Peter Keith told CNBC.
On the other hand, Bath & Body Works — which sources about 85% of its products from North America — would be less vulnerable, Hutchinson noted.