Will Prices Come Down With Trump’s Tariffs? It’s Complicated

Travel bag and accessories brand Lo & Sons reluctantly raised prices on some products last year after President Donald Trump slapped steep tariffs on Chinese-made goods, including the company’s signature canvas totes.

Those tariffs — 45 percent or more on most goods — were ruled unconstitutional by the US Supreme Court last week. Lo & Sons chief executive Derek Lo said he hopes someday to offer discounts or lower prices to win back customers who were turned off by the brand’s post-tariff price hikes, which were “significant” on some accounts. But not yet.

“Hopefully we will start to see some of the impact of the lower tariffs this year, if not the following year,” Lo said.

Like much of the fashion industry, Lo is still bracing for the other shoe to drop. Within hours of the ruling on Friday, Trump announced a new, global tariff of 10 percent, which he later raised to 15 percent. He has vowed to take other measures to rebuild the tariff regimen the justices struck down. Brands hoping to recoup tariffs already paid face a long legal battle with the White House.

Trump’s defiant stance sent retail stocks tumbling on Monday, with shares of fashion retailers from Macy’s to Vans owner V.F. Corp. to American Eagle seeing shares decline by more than 5 percent. Many now trade below where they stood before the ruling.

“The uncertainty of the tariffs could be worse than the severity of them,” said Simeon Siegel, analyst at Guggenheim Securities.

The industry finds itself back in the position it was in immediately after “Liberation Day,” when Trump first announced his tariffs last April: having to make decisions on inventory and prices without knowing what goods will cost. Even if tariffs remain at lower levels, that creates its own dilemmas.

“Each company will decide: will they hold the gains, or will they give them back to customers,” Siegel said.

In the short term, any markdowns will likely be in the form of seasonal discounts or promotions, rather than permanent price cuts. Retailers considering this course of action will tend to be value players or those struggling to maintain momentum, according to Tom Nikic, analyst at Needham & Company.

Brands that held onto customers while they raised prices may feel little need to lower them, regardless of where tariffs are set. If lower levies boost margins, they may decide they have better ways to invest that cash.

“If you’re Ralph Lauren … or On Running, you’re trying to have an aspirational consumer viewpoint, so you’re not going to give the pricing back,” Nikic said. “Some of the savings will drop to the bottom line but you’ll see a big chunk of it get reinvested in marketing, the digital experience, the in-store experience.”

Many brands could use a boost to the bottom line. In Siegel’s analysis of recent retail earnings data, fashion and beauty companies on average saw 7 percent lift in sales — in part driven by price increases — but a small dip in gross margins, an indication costs were rising even faster.

Maintaining a strong value proposition, or how customers perceive the brand, is critical at a time when shoppers have become more intentional with every dollar. Whether it’s a compelling price, stellar customer service or compelling storytelling, brands have to stand out in a market where “value” is no longer just about affordability, but about the emotional and functional payoff of the purchase.

“It’s tricky for everyone,” said Siegel. “You spend years finally accustoming yourself to a new cost structure and watching the group effectively all agree, and now these companies need to reevaluate again.”