Apparel Brands Concerned Over Trump's Potential Border Tax

Apparel companies will have to face the Trump question ahead of fourth-quarter earnings calls. (Image via the Los Angeles Times)

We told you about Trump's proposed 20 percent tariff on Mexican goods. This potential measure has many apparel companies concerned about its hypothetical impact on their earnings. According to the Los Angeles Times, this border tax could make apparel goods more expensive, which would affect the U.S. apparel business model.

Ahead of the fourth-quarter calls with Wall Street, apparel companies are not sure how to brace for Trump's new mandates. While Wall Street analysts do not expect these businesses to predict the future, they do have to know how they will react if this border tax goes through. Brands like Under Armour, Ralph Lauren, Coach and Hanesbrands Inc. report their quarterly earnings this week, and they will have some questions to answer.

“There’s a very dark cloud over the group right now, which stems from poor fundamentals, but secondly because of the tail risk that’s associated with what Trump will do in terms of tariffs,” said Ike Boruchow, an analyst at Wells Fargo, according to the Los Angeles Times. “We’ll start to get a few nuggets out of these companies that help us think about what the tail-risk is for Trump trade change. Every company has their tax people, every company is looking into it, but right now, their answer is probably similar to yours and mine—they don’t really know.”

Bernard Arnault, chairman and CEO of LVMH Moët Hennessy Louis Vuitton, faced the Trump question as he spoke with analysts last week.

He responded:

The USA is the world’s leading market. So, obviously, for us it’s very important to follow what’s happening. Currently, the market’s very promising, very buoyant. The atmosphere is, well, perhaps not euphoric, but almost. You see that the stock market has topped the 20,000 mark. And the Dow Jones for the first time, that’s historic. Is all that going to continue? Well, I have to say that the measures that have been announced, the tax cuts, easing regulation and investments in infrastructure, all that’s pretty promising for companies that are in the United States. I don’t have the exact figure, but a large part of Vuitton products sold in the United States are made in the United States. So we’re really quite immune there. And for the other products, we’ll see what happens. But then again, we do have some flexibility on the prices.

Whatever the future holds, apparel companies are hoping that Trump will keep the interests of American businesses top-of-mind. It will be interesting to see how this all plays out.

Would Trump's potential Mexican tariff affect your business? Let us know in the comments section.