Will Trump tariffs end up helping Next, M&S and Dunelm?
UK heavyweights who aren’t exposed to the US market, like Next and M&S, may end up seeing some silver linings from Trump’s tariffs, according to analysts.
Only a few UK retailers – namely JD Sports, Doc Martens and Burberry – sell to the states and produce in eastern Asia.
Berenberg analysts said that positives from the turmoil for the UK may include lower input costs as suppliers in China and other Far East countries divert more production and supply to the UK.
“Best placed in this situation to benefit from lower input costs are those retailers with zero or negligible US sales exposure that source mainly from the Far East, such as DFS Furniture, Marks & Spencer, Next, Dunelm, Kingfisher and Zalando,” they wrote.
The analysts added that if Chinese and south Asian countries reduce prices, UK consumers “could benefit from deflation in non-food categories such as clothes and toys, which could boost retail sales volumes”.
However, head of retail at RSM UK Jacqui Baker noted the effect of “another layer of uncertainty” which “will impact purchasing decisions, future supply chains and ultimately hit already squeezed margins”.
Director of food and sustainability at the BRC Andrew Opie also pointed to uncertainty as a major issue, as well as the risk that global prices of goods may rise, putting pressure on inflation.
But chief investment analyst at Charles Stanley, Rob Morgan, wrote that if inflation does “remain well behaved” then “the clear focus for the Bank of England will be contending with any growth shock, implying deeper rate cuts”.
“This will then have the positive effect of reducing mortgage and borrowing costs, restoring some consumer spending power and business confidence,” Morgan added.
Boohoo and Asos’ unlikely boon
Berenberg analysts added that the steep drop in Asos’ share price – nearly 14 per cent by April 7 – was “overdone” and that Asos’ recent change in its distribution network would benefit the e-commerce giant.
At the start of the year, Asos closed its US distribution base in another effort to boost profitability and streamline operations. Boohoo made a similar move last October.
“Only 11 per cent of sales are in the US and the planned closure of the US warehouse by the end of August will mean that non-China sourced goods sent in individual packages to US customers from the UK warehouse will be exempt from duty under the de minimis exemption rules,” analysts said.
‘De minimis’ rules are a loophole for small shipments of goods from overseas. The rules allow packages of under $800 (£620) to be imported free from customs duty.
On April 2, Trump closed the loophole – but only for goods shipped directly from China and Hong Kong.