What implications Trump’s Presidency may have on UK retail

London - 2016 has proved to be quite the year so far. Following the economic and political uncertainty brought on by the Brexit, comes an even more pivotal moment - Donald J. Trump winning the U.S presidential election. As the United States, and the rest of the world, wait to see what Trump will do next and the UK government considers inviting Trump for state visit, retailers ponder what effect his presidency may have on their business and trade, even if it may not happen any time soon.

Although most would think that the Trump administration would not have any direct affect on UK retailers, its policies will have an impact nonetheless, warns retail research agency Conlumino in its Election 2016 briefing. However, the good news for retailers is that not all the changes that may happen will be negative. For example, retailers who have operations within the U.S will see the burdens on their businesses reduced in the medium term as corporation tax will drop, healthcare costs will be cut and red-tape is likely to be slashed - especially for retailers looking to grow and create jobs for Americans. The business environment in the U.S is also predicted to become more friendlier and more conducive to growth, making it easier for UK fashion retailers such as Jack Wills, Topshop and Primark to continue expanding.

How Trump's administration may effect UK Retail

In addition, UK retailers who may not have a presence in the U.S may also benefit from some of Trump’s policies, as Trump is most likely to prioritize establishing a strong trade deal with the UK. Although terms to this agreement are currently open to speculation at the moment and the timing of any deal will be drawn-out as approval for any agreement can only come with the UK’s exit from the EU, it will inevitably mean that trade between the UK and US will only become even stronger and more accessible - something UK retailers can certainly take advantage of, especially fashion retailers looking to enter the U.S market. Another potential benefit, in the short-term sees the current level of uncertainty in the U.S helping ease some of the pressure on the pound as the value of the dollar drops. However, this is unlikely to undo all of the depreciation the sterling has seen over the last months, warns Conlumino, “but it will take the edge off the decline and may stop further inflationary pressures.”

At this point, UK retailers may be wondering if their concerns for a Trump presidency may be misplaced, but any positive effects highlighted above are set to be counterbalanced by a series of negatives, warns Conlumino. For starters, outside of any potential trade deal made between the UK and U.S could see the importing and exporting of goods, including cotton, become much more challenging. If theTrump administration does place tariffs on goods from China and other countries, UK retailers in the U.S could find to much more costly to bring their products into the country. This could be particularly problematic for fashion retailers as well, given the international nature of their supply chains. Another negative implication could happen if the Trump trade policy results in a closed global economy, a move which could even affect UK retailers who have no links or relations with the United States. How?

“If U.S policy pushes up costs for Chinese manufacturers or reduces their economies of scale, retailers might find the goods they source become more expensive.” The increase in cost would then have to be passed on by UK retailers to either the consumers, or taken from their margins - neither one being a positive outcome. On the flip side, prices in the UK may also increase for products made by American companies. For example, computer giant Apple’s products are reliant on Chinese manufacturing. But if the Trump administration places barriers on the free movement of Chinese parts, or increases costs within their supply chain, then this cost will eventually find its way back to the consumer. With consumers confidence in the UK already being battered by Brexit, an increase in product prices in a future no one looks forward too.

Photo 1: Donald Trump, by Gage Skidmore via Flickr
Photo 2: Oxford Street. FashionUnited