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Dollar Tree CEO warns that more China tariffs will hurt shoppers

China tariffs could raise cost of shoes
  • Dollar Tree is joining other major retailers, including Walmart and Macy's, in warning that U.S. tariffs on Chinese imports will affect the discount chain's shoppers.
  • Dollar Tree's CEO told Wall Street analysts that a proposed round of tariffs will be "impactful to both our business and especially to consumers in general."
  • The New York Federal Reserve calculates that tariffs already imposed on Chinese imports will cost American families an average of more than $800 a year.  

Dollar Tree CEO Gary Philbin said Thursday that the Trump administration's next round of tariffs on Chinese imports could affect the discount retailer's customers, joining other merchants in warning about the impact of the festering trade dispute between the world's two biggest economies.

Proposed levies on $300 billion in goods the U.S. buys from China, including clothing and consumer electronics, could jump from 10% to 25% as soon as late June. The Trump administration earlier this month also hiked tariffs on $200 billion worth of Chinese imports

If the new tariffs take effect, "We expect that it will be impactful to both our business and especially to consumers in general," Philbin said in a call with Wall Street analysts to discuss the company's latest earnings.

Walmart, Macy's and discount rival Dollar General have also recently said that additional U.S. tariffs on Chinese goods will likely mean higher prices for consumers. Economists at the New York Federal Reserve calculate that tariffs already imposed on Chinese imports will cost American families an average of more than $800 a year.

President Donald Trump maintains that China, not American businesses or shoppers, will absorb such costs.    

When did Trump's love for tariffs start?

Philbin said Dollar Tree is acting to keep a lid on the chain's prices despite the hit from tariffs, including looking at suppliers in other countries for its merchandise. 

Dollar Tree could offset the effect of tariffs on its costs by boosting prices in its own stores or in its Family Dollar subsidiary. But KeyBanc analyst Bradley Thomas said the discounter is more likely to make changes to its product line to protect its dollar price point. Dollar Tree has mostly kept prices at $1, even as competitors Family Dollar and Dollar General have raised their pricing above that level. 

"The business model is 'Everything is a Dollar,' so you would have to work through changes in your assortment and in the supply chain," Thomas said. For example, a 24-count box of crayons can be reduced to 20 crayons or 18 crayons, so shoppers would pay the same dollar for less value.

Separately, the company is planning to roll out a Dollar Tree Plus! brand in more than 100 stores to test $3, $4 and $5 price points. However, it said in its earnings release that while it may be experimenting with multi-price points, it "is not raising retail on its current assortment of items priced at $1."

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