The market was on fire early on Monday after President Donald Trump announced the reduction of tariffs on Chinese imports from the self-imposed 145% to 30%, for at least the next 90 days. This will allow for more negotiations, and although a deal is far from final, it looks like the tensions are coming down for now.
Some of the biggest moves came from companies in retail. Mattel (NASDAQ: MAT) was a big winner, rising 11.1% at its peak and holding a 10.2% gain at 3:45 p.m. ET after being in the president’s crosshairs. Deckers Outdoor (NYSE: DECK) jumped as much as 10.2% and Best Buy (NYSE: BBY) was up 11% but the two stocks fell back to 3.1% and 6.1% gains on the day, respectively.
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Mattel’s battle with the White House
Mattel has specifically been on Trump’s mind because its CEO said tariffs will be an added cost to consumers and won’t result in U.S. manufacturing. The company may be able to diversify supply outside of China, but with little scale in the U.S., it’s unlikely the company would move production to its home country.
That released the ire of Trump, who has threatened Mattel-specific tariffs. But that’s unlikely, and Mattel will now benefit from the lower tariffs announced today.
Product companies and tariffs
Mattel and Deckers Outdoor fall into similar buckets as companies that produce products in China and other Asian countries hit by tariffs. Higher costs could have a direct impact on their bottom lines, but the other factor to add in is the squeeze tariffs could put on demand for consumer goods.
If buyers are spending more money on each item it leaves less for more items, which may mean a few fewer Barbies or Hoka shoes sold this holiday season.
In that respect, tariffs could have been a double-whammy this year.
Retail’s sigh of relief
The same can be said for Best Buy, which was facing higher costs for nearly all of its electronic devices. The company wouldn’t have been hit directly by tariffs, but suppliers would likely have needed to raise their prices, which would then be passed on by Best Buy.
A 30% tariff sounds big, but it’s a relatively small percentage of the retail price of items, so it may be eaten by producers or retailers rather than resulting in significantly higher prices.
I still think tariffs are an incremental headwind for the industry, but Best Buy and others are in a better position today than they were yesterday.
More uncertainty ahead
As much as the market is cheering today’s news, keep in mind that tariffs are higher than they were at the start of the year and companies only have certainty for the 90-day pause. After that, tariffs may elevate again.
The policy environment is also far from certain given the volatility coming from the White House in terms of tariff and trade policy. I think the pop today is deserved, but don’t be surprised if stocks drop again if bad news comes out in the future.
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Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Best Buy and Deckers Outdoor. The Motley Fool has a disclosure policy.
