China tariffs may lead to 'widespread storeclosures': UBS

The US-China trade war could cause prices to rise on everything from apparel to toys, but it also could lead to 'widespread' store closures, according to a report by investment bank UBS, which said tariffs on Chinese imports could put $40 billion of sales and 12,000 stores at risk. In April, UBS anticipated 20,710 apparel stores need to close by 2026.

“The market is not realising how much brick & mortar retail is incrementally struggling and how new 25% tariffs could force widespread store closures,” UBS analyst Jay Sole wrote in the report.

Potential 25% tariffs on Chinese imports could accelerate pressure on these firm’s profit margins to the point where major store closures become a real possibility, the report said.

The Trump Administration earlier this month, increased US tariffs on $200 billion in Chinese imports from 10% to 25%. The president has also threatened to add a 25% tariff on almost all the remaining $325 billion in goods shipped in from China.

Even before, retailers have been struggling this year and have announced more closings in the first 20 weeks of 2019 than all of last year, US media reported citing Coresight Research.

The global market research firm tracked the 5,864 closings in 2018. Coresight has tracked nearly 6,400 closing announcements this year, but in a fresh report estimates 12,000 stores could close by the end of the year. Retailers say they are closely monitoring the trade situation and how a potential fourth wave of tariffs could impact prices.

 

 
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