Cambodian factory workers exit their factory as they take a lunch break in Phnom Penh on March 2, 2020.
Tang Chhin Sothy | Afp | Getty Images
As European markets tumbled Thursday following U.S. President Donald Trump’s stunning tariff announcements, big retail names selling products ranging from sportswear to jewelry were among the worst performers.
A host of goods sold to U.S. consumers by European companies are manufactured in, or pass through factories in, Southeast Asia — a region encompassing developing, export-reliant economies that were unexpectedly hit by some of Trump’s highest duties.
Cambodia — where close to a million people work in the garment and footwear factories that produce around 70% of the country’s exports — was hit with the highest rate of tariffs at 49%.
Duties on U.S. imports from Laos, meanwhile, were set at 48%, Vietnam’s came in at 46%, Thailand’s were 36% and Indonesia’s 32%. The Trump administration’s way of calculating the tariffs has been heavily criticized for ignoring both trade in services and the low purchasing power of the countries hit with the highest tariffs.
Sri Lanka and Bangladesh were also among the factory hubs where analysts at Citi said tariffs were “much worse than expected.”
The news sent European retail stocks sliding.
Jewelry-maker Pandora plunged 11% Thursday. The company’s manufacturing and refinery locations span Southeast Asia, as well as China, Japan, India, South and North America and Europe.
German sportswear firms Puma and Adidas, meanwhile, were down 11% and 9.7%, respectively. The U.K.’s JD Sports dropped 5.5%, shoemaker Dr Martens lost 5.9% and British luxury firm Burberry shed 6.2%.
“The impact of the Trump tariffs [on] company profits and cashflows depends to a large degree upon how long the duties stay in place and the company and industry in question,” Russ Mould, investment director at AJ Bell, told CNBC by email.
“The companies with the greatest challenges may be those where a big portion of their total sales are into the USA and where a big portion of their supply chain is based in Asia — clothing retailers will be looking very closely at this. They may be able to rearrange supply chains, but it will take some time.”
As in the U.S. — where retailers also often have very global supply chains — corporate profits are expected to be squeezed, and shoppers are set to pay higher prices.
“Asia is the primary sourcing hub for sportswear, the cost of business has just gone through the roof. Existing inventory in the market and with retail partners will slightly delay the impact on consumers, but only for a few months,” said Mamta Valechha, consumer discretionary analyst at Quilter Cheviot.
Cailin Birch, global economist at the Economist Intelligence Unit, told CNBC on Thursday it would now be more complicated for specialty retail brands to plan for their future.
“These tariffs were higher than expected. There’s a lot of uncertainty around the makeup of them,” she said, explaining that Trump could raise or lower the duties in the future.
“So they’re already caveating, the administration, where those numbers are going to end up, and this is before we even get to market pressure. So how can companies reliably think about where they’re going to produce, sell and market their goods, when they have no idea what [tariffs are] going to be here in six months or four years?”
Consumers were largely able to keep up with higher prices during the pandemic inflationary shock, Birch said, but this was because the price rises were combined with government stimulus, solid labor markets and wage growth.
“We aren’t going to see that demand side of the equation keeping up this time around,” she said.
