Wall Street analyst breaks down the impact of U.S. tariffs on the retail sector

Investing.com - Although the retail sector appears to be one of the hardest-hit by U.S. President Donald Trump’s aggressive tariffs on China, some of these companies could be insulated from the levies following a multi-year push to diversify the countries they source products from, according to analysts at Telsey Group.

Earlier this month, Trump slapped aggressive reciprocal tariffs on a range of countries around the world, arguing that it was necessary to correct longstanding trade imbalances and raise revenues for the U.S. The president later partially delayed many of these levies for 90 days following deep ructions in stock and bond markets.

The White House has also temporarily paused the elevated duties on a slew of electronics like computers and smartphones, while Trump has floated potentially granting some car-related tariff exemptions.

While the moves have helped to somewhat ease investor anxiety around the tariffs, fears remain around the impact of an ongoing -- and escalating -- trade war with China. Trump has lifted duties on the world’s second-biggest economy to a staggering 145%, while Beijing has retaliated with their own tariffs of 125% on U.S. imports.

In a note to clients, the analysts led by Dana Telsey said "hardlines retailers and brands" -- or businesses that sell durable goods with longer lifespans -- face "varying levels of exposure" to the tariffs depending on their product categories and sourcing strategies.

Sporting goods, bikes, outdoor and camping equipment sellers have heavy exposure to Chinese products, and will be dented the most by the tariffs, the analysts predicted. However, they noted that the exposure seems to be manageable for footwear manufacturers like Adidas AG (ETR:ADSGN), Nike (NYSE:NKE) and Under Armour (NYSE:UA).

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Discount retailers, particularly Walmart (NYSE:WMT) and Dollar Tree (NASDAQ:DLTR), also have "significant" exposure to China, they said.

Meanwhile, the U.S. furniture industry sources almost half of its products from China and Vietnam, potentially leaving small- and mid-sized firms in the sector vulnerable, they said. The apparel industry is also largely dependent on Asia and China.

But they flagged several retail sectors seem to be more protected from the U.S.-China trade spat, including food and beverage, specialty apparel, and the beauty and luxury industries. Home improvement may also be impacted, but the hit could be moderated thanks to a multi-year drive to find sources outside of China in recent years, the analysts added.

The Trump administration’s recent halt to the tariffs for many tech-related products also presents a reprieve for some retailers of these items, including e-commerce titan Amazon (NASDAQ:AMZN) and consumer electronics company Best Buy (NYSE:BBY), they said.

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