Opportunity? Retailers in for big hit if U.S. exits NAFTA

Steve’s breakdown: Where are they? The “opportunities” I mean. In Canada and Mexico? That’s not a bad bet whether we bail of NAFTA or not. Maybe shift to American made only retailers? That couldn’t hurt either.

The most important thing to remember is Retail is the most important category for consumer driven marketing firms. Advertising is crucial to their business and they do a ton of it when compared to other segments.

So read A.T. Kearney’s How Retailers Can Prepare for NAFTA’s Future report and start brain storming because “Winter is Coming”.

EVERYWHERE, USA: New tariffs, reduced retail spending, and lost jobs are among the outcomes if the United States exits the 24-year-old North American Free Trade Agreement.

The near-term cost to retailers of leaving NAFTA is estimated at $15.8 billion in added tariffs and reduced margins, according to a study from global strategy and management consulting firm A.T. Kearney. The retail industry imports $182 billion of goods from NAFTA partners.

“Retailers in different sectors would be affected in different ways—even from product to product,” said Johan Gott, A.T. Kearney principal and co-author of the study. “But bottom line, the impact will extend to millions of products imported into the U.S.”

The study, How NAFTA Affects US Retail, quantifies direct and indirect margin impact across all sectors of retail. It also quantifies the impact on retail employment, projecting losses of over one hundred thousand jobs within the next three years.

“NAFTA has dramatically influenced the US economy, the retail sector, and Americans’ standard of living,” said Gott. “From the time it came into force, retailers have gradually become de facto importers, because their customers demand the products that NAFTA allows them to purchase easily, affordably, and with great variety. Retailers, then, are agents without the protections that other importers enjoy.”

Should NAFTA be terminated, the report suggests that retailers:

• Take steps to quantify the impact on their cost of goods sold;

• Outline a response in terms of several different scenarios that factor in potential impact;

• Become an active voice with policymakers, industry groups and peers to share the real, direct impact that the end of NAFTA would have; and

• Be prepared to share confidential data with government officials to demonstrate this impact.

“If the United States terminates NAFTA, many importers would likely be covered by other protective sanctions against foreign competition,” added Gott. “US retailers do not face the same kind of foreign competition, but they would be left to face higher costs for the goods they sell — a prospect whose ramifications would reverberate throughout the US economy.”

The A.T. Kearney study was done in partnership with the National Retail Federation (NRF), Retail Industry Leaders Association (RILA), and Food Marketing Institute (FMI). To view the full How NAFTA Affects US Retail study, visit atkearney.com/retail/how-nafta-affects-us-retail.

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