Retail stocks soared after U.S. President Donald Trump said he’ll pause higher tariffs for 90 days for dozens of nations that haven’t imposed retaliatory measures on the U.S.
Countries getting a reprieve include several key suppliers for many apparel and sneaker makers. Critical production hubs including Vietnam, Indonesia and Cambodia have all expressed interest in negotiating trade deals with the U.S., but global supply chains remain in limbo until any new pacts are reached.
Shares of retailers broadly traded higher on Wednesday afternoon including Nike Inc. up as much as 12 per cent, Walmart Inc. up as much as 11 per cent, Lululemon Athletica Inc. up as much as 16 per cent, and Gap Inc. up as much as 19 per cent. The S&P 500 Consumer Discretionary Index saw its largest gain since 2008.
Trump’s about-face came roughly 13 hours after higher reciprocal duties on 56 nations and the European Union went into effect, a move that had fueled market turmoil and stoked recession fears.
Countries that were hit with the higher, reciprocal duties that went into effect at midnight will now be taxed at the earlier 10 per cent baseline rate applied to other nations, with the exception of China, according to a White House official. China’s duties were raised to 125 per cent over its refusal to negotiate.
The news is a positive development for retailers that have been shifting away from China into neighboring countries, said Poonam Goyal, an analyst at Bloomberg Intelligence. Sportswear brands, for instance, could largely mitigate a 10 per cent tariff and can reroute production from China to Southeast Asia to avoid higher duties, Goyal said.
--With assistance from Janet Freund.
(Updates with analyst comment in sixth paragraph.)
Kim Bhasin, Bloomberg News
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