U.S. Tariffs on Imports From China: Eye-For-An-Eye Tactics Blind Some U.S. Retailers

President Trump's universal 10% tariff on all U.S. imports came into effect on April 5, 2025, with additional tariffs levied on many of the U.S.' trading partners effective today, April 9. The tariffs imposed on China were particularly high as, in addition to the 20% tariff already in place, the Trump administration raised the tariff by another 34%. In response to China's announcement of counter-tariffs of 34% on all goods imported from the U.S. effective April 10, the U.S. imposed an additional 50% tariff on China, also effective today, bringing the total tariff to 104%. This volatile and rapidly changing situation will likely have far-reaching consequences for U.S. retailers of all sizes.

KEY HIGHLIGHTS:
-- U.S. retailers, particularly those that source a material portion of their merchandise directly and/or indirectly from China, could find decoupling from their Chinese suppliers challenging in the near term.
-- China is one of the largest sources (and in some cases the largest source) of merchandise directly or indirectly imported by some of the largest retailers in the U.S.
-- The macroeconomic impact of tariffs on the U.S. in 2025 will likely manifest as slower economic growth and higher inflation, which will dampen consumer spending growth.

"As U.S. retailers react to these tariffs--and consumer behaviour changes in response--we expect such market dynamics to have a varied effect on their operating performance and free cash flow, as well as their long-term credit risk profiles," said Aarti Magan, Vice President, Corporate Ratings. "However, any credit rating actions we might take on individual U.S. retailers in our portfolio will be driven by the evolution of their credit risk profiles."