In the wake of Donald Trump’s return to the White House, retail is poised to experience a unique combination of advantages and challenges. According to Neil Saunders, Managing Director of Retail at GlobalData, “a Trump victory brings a mixed bag of positives and negatives, with a large dose of uncertainty.”
The retail analyst notes that a continuation of Trump’s 2017 tax cut package, scheduled to expire at the end of 2025, could benefit consumer incomes. “This will be broadly helpful to consumer incomes,” Saunders explains, adding that “retailers should not expect to see a surge in spending” as these cuts largely maintain existing levels of disposable income.
However, Saunders suggests that further cuts could be possible, especially if Congress leans in Trump’s favour. “This will put more money into consumers’ pockets,” he says, potentially bringing a “small boost to retail spending” in the short term.
Tariffs and inflation loom as potential risks
While tax cuts may offer a short-term boost, Saunders warns that Trump’s trade policies could prove costly for the retail sector.
Trump’s threat of escalating tariffs on Chinese goods could create what Saunders describes as an “enormous headache” for US retailers, who would face “significant additional cost.”
A longtime industry observer, Saunders clarifies that tariffs would directly impact companies: “Despite Trump’s assertions to the contrary, tariffs are paid by the companies or entities importing goods and not by the countries themselves.”
This shift, Saunders adds, could force retailers to either absorb the increased costs, reducing profitability, or raise consumer prices, which “would fuel inflation and dampen retail volume growth.”
Higher tariffs could also impact supply chains, leading to disruptions as companies adapt to a more restrictive trade environment. Saunders points out that while “supply chains would adjust to a new tariff regime,” this process “would not happen overnight and would be incredibly disruptive.”
He also hints that Trump’s tough talk on tariffs may serve as a negotiation tactic, with a final policy likely being “relatively modest in scope.”
However, Saunders warns that if tariffs are enacted, they could keep “interest rates higher for longer,” thereby negatively affecting categories like home improvement, as higher borrowing costs dampen housing market activity.
Changes in corporate regulation and mergers
In addition to tax and trade policies, Saunders expects Trump’s regulatory approach to differ significantly from his predecessor’s.
Saunders predicts that the current administration’s “hostile approach” to mergers and acquisitions through the Federal Trade Commission (FTC) will likely be replaced by a more “favourable” stance toward corporate dealmaking.
This shift could facilitate retail consolidation, although Saunders clarifies that it “does not necessarily mean that big deals like Kroger-Albertsons will be waved through.” Instead, other mergers—such as Tapestry-Capri—might receive “a far warmer reception” under Trump.
However, Saunders cautions that Trump’s regulatory stance may still reflect “a slightly anti-big tech bias,” indicating that scrutiny in this area may persist.
Ultimately, the industry insider sees Trump’s return as a mixed outcome for retail. “A second Trump administration will not collapse retail, nor will it propel it to dizzy heights,” he concludes.
The overall impact, Saunders believes, will be to “change the gradient of the growth trajectory, and the tonality of the policies retailers need to deal with.”
The sector’s future may largely depend on how retailers navigate these changes, balancing the potential benefits of tax relief with the challenges posed by heightened tariffs and evolving regulatory dynamics.
