Reader discretion is advised.
As crisis planning once focused on natural disasters, retailers are now scrambling to prepare for the unpredictable nature of tariffs, thanks to President Trump’s trade policy. The era of “Trump majeure” has become a reality, and retailers must adapt to navigate this unpredictable environment.
As crisis planning once focused on natural disasters, retailers are now scrambling to prepare for the unpredictable nature of tariffs, thanks to President Trump‘s trade policy.
Trump's trade policy focused on renegotiating existing trade agreements, particularly the North American Free Trade Agreement (NAFTA).
The United States-Mexico-Canada Agreement (USMCA) replaced NAFTA in 2020.
Key components include reducing tariffs, improving intellectual property protection, and increasing access to Canada and Mexico's markets.
Tariffs were also imposed on imported steel and aluminum from certain countries.
Additionally, the Trump administration pursued a more aggressive approach to enforcing trade laws and addressing unfair trade practices.
Understanding the Threat
Tariffs have become an act of divine upheaval, making it challenging for businesses to operate under a stable set of rules. The speed and unpredictability of these threats have caught many executives off guard. However, one thing is clear: preserving optionality is no longer just a strategic advantage but a survival skill.
Tariffs are taxes imposed on imported goods, which can significantly impact businesses that rely on international trade.
According to a study by the National Bureau of Economic Research, a 10% tariff increase can lead to a 2-4% decline in exports and a 1-3% decline in imports.
This is because tariffs make foreign goods more expensive, reducing demand and increasing production costs for businesses.
In 2019, the US-China trade war resulted in over $360 billion in lost economic output due to tariffs.
The Impact on Retail Businesses
For American retailers large and small, the erratic tariff policy feels more like an economic strategy gone awry. Navigating pricing, planning, and logistics has become a high-stakes guessing game. When policy shifts are announced via social media, trade alliances can dissolve overnight, and tariff schedules flip faster than a quarterly budget cycle.
The US retail industry has faced significant challenges in recent years, driven by shifts in consumer behavior and technological advancements.
Between 2015 and 2020, over 15,000 stores closed across the country, with major retailers like Sears, Kmart, and 'Toys 'R Us' filing for bankruptcy.
According to the National Retail Federation, online sales have increased from 8% of total retail sales to 18% during this period.
US retailers must adapt to these changes by investing in e-commerce platforms, improving customer experience, and leveraging data analytics to stay competitive.
Small Brands Scramble While Insulated Players Seize Advantage
Entrepreneurs like Steve Skillings, founder of BusyBox, a small manufacturer of smart-home gadgets, are facing skyrocketing component costs due to tariffs. The situation is dire: ‘I’ve stopped advertising. I’m laying off contractors. There’s no capital, no SBA help and no roadmap,’ he told Observer.
In contrast, companies like Faribault Mill, which works with over 2,500 baby products, have found a way to remain resilient due to their hyper-local model. Nearly all inputs, from wool to labor, are sourced domestically, making them less vulnerable to supply chain shocks.
The China Dilemma
For many companies that have relied on foreign sourcing, particularly China, the recent tariff threats have created uncertainty. Moving away from these supply chains is not as easy as it sounds, with higher costs, inconsistent regulatory regimes, and fragile infrastructure.
Businesses Build for Instability
Across the board, companies are responding in different ways: some are shifting production, others are building structural flexibility into their operations, leaning into innovation, or even engaging in policy advocacy. Emily Hosie, founder of REBEL, is lobbying for tariff exemptions on baby products, stating that ‘These aren’t luxury goods. They’re required by law.’
Keegan Nesvacil, CEO of Woodland Tools, describes a ‘design-for-resilience’ model, integrating customer feedback and supply chain data to pivot quickly in response to complex supply chain demands.
A Growing Recognition
The businesses that endure will be those built to bend, not break. Resilience now depends on agility, optionality, and the recognition that there’s no cookie-cutter playbook. If President Trump‘s first term taught global business leaders anything, it’s that constant recalibration poses the greatest threat to commercial stability.
Conclusion
The era of ‘Trump majeure’ has become a reality, and retailers must adapt to navigate this unpredictable environment. By embracing agility, optionality, and a willingness to rethink old playbooks, businesses can increase their chances of survival in a world of political whiplash.
