President Donald Trump’s so-called border adjustment tax proposal is intended to boost U.S. manufacturing and bring jobs back to America that have gone overseas over the years. The President has said that a 35 percent tax or tariff would be imposed on companies that shut down manufacturing plants and lay off workers in the U.S. and ship products back into the U.S. For retailers, this would create a border tax on imported goods from many of their suppliers, however, a more concrete version of this border tax (currently under consideration by House GOP leaders) would hurt retailers in a different way — the plan would effectively eliminate their ability to deduct the cost of merchandise they bring into the U.S. Instead, stores would be taxed, at the current 35 percent corporate rate, on the full selling price of imported merchandise and not just their profit. Target’s CEO Brian Cornell recently visited lawmakers in Washington to lobby against the proposal.
Total Retail’s Take: This proposal would definitely take a toll on retailers, considering 97 percent of all clothing and footwear sold in the U.S. is imported. Many retailers wouldn’t be able to bear this burden, and would be forced to pass off the increase to consumers in the form of higher prices. Recently, retailers like Kroger and Wal-Mart have announced plans to create more domestic jobs. For most right now it’s a wait-and-see approach, as any legislation is likely months away from passing.