Analysts Predict Over 12,000 US Store Closures This Year As Tariffs Increases
With China set to issue retaliatory tariffs as a response to the US' tariffs on Chinese goods coming into the country, prices for a wide variety of consumer goods are expected to increase.
Retail items ranging from toys to clothing are expected to increase in price in the coming months. Analysts predict that this may eventually force a good number of retail stores to close as they may have a hard time coping with the additional costs and the decline in sales.
According to a report from UBS, analysts predict that the tariffs on Chinese imports could significantly affect the country's $40 billion retail sales market. This would also effectively place hundreds of retail firms at risk of closing. Traditional brick and mortar retail businesses in the United States have been struggling as it is and an additional 25 percent tariff could spell doom for most of them.
Analysts revealed that the tariffs could accelerate the inevitable closure of some of the stores who are already struggling to make a profit. Some of the closures are meant to offset the added cost of the tariffs and the decline in overall spending in the country. Decreasing operational costs may end up saving some companies, while others may eventually kick the bucket.
Earlier in the month, Trump had officially increased the tariff rates from 10 percent to 25 percent on about $200 billion worth of Chinese goods coming into the country.
Trump also threatened to expand the tariff hike to an additional $325 billion worth of Chinese goods, essentially covering everything from car parts to shoes.
With the tariffs in place, UBS predicts that 20,710 clothing retail stores may be forced to close by 2026. The investment bank also noted that it only kept track of publicly traded companies, which means that the impact could be much wider if it included privately-held firms.
Some clothing companies have already announced a reduction of their outlets nationwide. Dressbarn recently revealed that it was going to be closing close to 650 locations nationwide. Meanwhile, brands such as Payless and Victoria's Secret have already closed hundreds of their retail outlets as well.
The number of stores that will be closing this year is expected to greatly overshadow the figures recorded in the past few years. In 2017, over 8,139 retail stores were closed.
This was followed by a decline in 2018, where only 5,864 retails stores closed up shop. Within just the first quarter of 2019, over 6,400 retail stores have already closed. Research firms predict that the number of store closures at the end of the year could exceed 12,000.