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What Impact Will the Trump Administration Have on Retail?

Shelley E. Kohan
Shelley E. Kohan
Vice President of Retail Consulting

The potential impacts of the new administrations on retail have the potential to be enormous, but it will take several months to see what part of the talk turns into real work and actionable plans and policies.

Friday, Donald Trump will be sworn in as the 45th President of the United States of America (the 44th person to serve as President), and perhaps no inauguration in recent history has arrived with as much public controversy or as many questions and uncertainties. Seemingly everyone is wondering what impacts will be felt after all the talk – positioning and posturing from both sides of the aisle –stops and the real work begins. Retailers are as anxious as anyone, as everyone is wondering how the new Trump Administration is likely to affect the retail industry.

 

Photo Credit:  Mike Theiler/Reuters

Photo Credit: Mike Theiler/Reuters

From a retail perspective, the Trump administration may potentially have a substantial impact on the industry in terms of trade agreements and corporate tax reform. However, we will not truly understand the depth of this impact until we begin to see real policy changes that support the new President’s view of these issues. Most likely, President Trump’s first actions will impact fiscal policy, including both corporate tax reform and government spending.

If Trump’s campaign promises come true with more jobs created in the U.S. and a renewed emphasis on building up and modernizing the country’s infrastructure, these could both be favorable catalysts for the retail trade industry. Simply, more jobs equate to more money in the economy for discretionary spending. However, on the contrary, if Obamacare is repealed and potentially leaves millions of Americans without healthcare coverage, it will curtail discretionary spending as those who lose coverage will most likely limit spending until the healthcare coverage issue is resolved, even on a short-term basis. Additionally, undocumented immigrants are most likely to pull back most all spending waiting to see if their status in the United States will be effected.

The concerns over a possible border tax on imports coming into the United States could have a significant impact on the ultimate consumer as these types of taxes will be factored into the price of goods and ultimately the selling price of products. In this current environment where the consumer is calling many of the shots in the world of retail, this type of tax would most likely impact consumers in two ways. First, and the most obvious, is the pull back on spending (the discretionary pie does grow bigger). Secondly, there is the negative physiological aspect of a very tax-weary consumer giving more money to the government resulting in less spend.

I expect consumer confidence to fluctuate over the first several months of President Trump’s administration until consumers, as a whole, have a better understanding of specific policy changes on the horizon. Right now, there are simply too many variables – for consumers and retail professionals alike – to consider in terms of Trump’s likely initiatives. It won’t be the President’s impact on the industry but the impact of the government in totality, its future policies, programs and the country’s collective confidence in leadership that will affect consumer spending and, thus, the retail industry’s performance.

Don’t expect complete answers to retail’s most pressing questions related to the Trump Administration until a few months pass – perhaps in the spring. By then, the Administration’s highest priorities will be clearly identifiable, and we’ll begin to see patterns of cause and effect emerge. Until then, retailers can expect the familiar roller coaster of emotional highs and lows that accompany every governmental transition.

One thing is for certain: It won’t be boring!

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