Tariffs are ‘leveling a lot of pain’ against consumers, AAFA CEO says
Yahoo Finance Video
American Apparel & Footwear Association CEO Stephen Lamar joins Yahoo Finance Live to discuss the state of retail, pricing pressure, inflation, supply chain issues, and tariffs.
Video Transcript
AKIKO FUJITA: Our next guest represents some of the biggest names in retail and says unrelenting inflationary pressures are leaving damaging effects on consumers, and change cannot come soon enough. Joining us to discuss is Stephen Lamar, American Apparel and Footwear Association CEO. Stephen, you know, you've been hearing us talk about what we heard from Target, as well as Walmart yesterday. What are you hearing from your members?
STEPHEN LAMAR: Well, they're telling us it's a horribly challenging environment. I mean, supply chain complications are extraordinary. On top of that, there's inflationary pressures really coming from everywhere. It's materials, labor, freight, energy, I mean, all the items that you were just talking about.
And those costs are coming on top of the unacceptably high tariff costs that we're still laboring under that were imposed from the Trump administration, or even tariffs that had been around for a very, very long time. And it's no surprise that we're seeing all of those costs translating to higher prices when you see the inflation numbers coming out, apparel, footwear, I mean, basic necessities. We're seeing prices rise to levels we haven't seen in a long time. Baby clothing, for example, almost 9%. I mean, that's really new numbers that we haven't seen in quite some time.
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BRIAN CHEUNG: Stephen, Brian Cheung here. I mean, is perhaps what's bad for some of these retailers now good for consumers from the standpoint that if a lot of these inventory builds are really getting to unsustainable levels, that we actually start to see some discounting from the likes of Target and other types of companies as well?
STEPHEN LAMAR: Well, you're right. There's a lot of inventory builds. And that was actually a strategy that companies use to manage last year's supply chain crisis, where they couldn't get goods in. Goods were unacceptably-- they were meeting high freight price pressures. Now, in effort to kind of mitigate that, people shipped early. They shipped in larger amounts. And what that's happening now is those goods are arriving just in time for these inflationary pressures that have been building up to be passed along. So now you're seeing, as you mentioned just before, higher inventory and higher pricing.
How does that translate? It's hard to see. We could see that result in lower consumer demand. We could see that result in some discounting. But it points to the need for the administration to do action now to get some of these inflationary pressures under control. The thing we've been recommending pretty consistently is, provide some tariff relief. And we think tariff relief is the first, best, easiest way to remove some of that pricing pressure out of these supply chains out of the equation. So that can be quickly translated back to lower prices for consumers.
AKIKO FUJITA: Specifically on those tariffs, imports coming in from China, I mean, how inflationary have they been?
STEPHEN LAMAR: Well, very inflationary. We're seeing inflationary pressures for the first time in a number of years. You know, and these are basic goods. And, you know, inflation is a very regressive way of consumers feeling price pressures. I mean, it directly and disproportionately impacts lower income Americans. Tariffs are as well. I mean, tariffs actually are doubly regressive because a larger portion of what lower income Americans pay are these consumer goods that have higher tariffs.
And there's a weird part of our tariff code, goods that are at the lower price scale tend to have higher tariffs than goods that are at the higher price scale. So it's a really effective way, tariffs are really effective way of leveling a lot of pain back to lower income Americans, especially lower income Americans with children. And again, one of the reasons why we're asking the administration, you've got the ability to remove these tariffs. You can do it with the stroke of a pen. They were imposed with the stroke of a pen. They can be removed with the stroke of a pen. Do that now. Get that done as soon as possible so we can build in that pricing relief as quickly as we can.
BRIAN CHEUNG: Stephen, something else that's also a possible policy issue coming up is that looming West Coast port labor contract negotiations. That's something that's going to heat up, I believe, as soon as next month. Does that present, actually, another upside inflationary risk from the perspective that if something can't get done on that front, a lack of longshoremen could actually further push prices higher?
STEPHEN LAMAR: Right, and yeah, the West Coast port labor contracts, they expire on July 1. We've been calling for the administration to make sure that those negotiations happen quickly. They happen-- we wanted them to happen sooner than they are. They're already negotiating right now to get an extension of that contract, to come up with new terms. But that causes a lot of uncertainty, a lot of concerns. In the best of times, these West Coast port contract renewals create a lot of disruption. And these are hardly the best of times.
And so we're worried that we could see, either in the approach to July 1 or after July 1, either slowdowns or other problems that result in goods moving slower as they come in through the West Coast, and as they are exported from the West Coast. So this would hit both importers and exporters if we see some real problems begin to develop there. And it's a good opportunity for the administration to show some leadership. They've already leaned in. I want them to continue to lean in to establish guardrails to make sure that these talks happen quickly, expeditiously, and we get a new contract in place so we can move on.
BRIAN CHEUNG: Yeah, in our conversation with Gene Seroka over at the Port of Los Angeles, he expressed some optimism that they could avoid any sort of kind of shutdown related to those talks. But again, Stephen Lamar, American Apparel and Footwear Association CEO, thanks again for taking the time this morning. Appreciate it.