A border tax will hurt some retailers more than others, experts say

Retailers have rallied against the proposed border adjustment tax, but some will fare better than others if such a measure is implemented, analysts told CNBC on Thursday.

That’s because it all comes down to who has pricing power and who doesn’t, Deutsche Bank retail analyst Paul Trussell said in an interview with “Power Lunch.”

“The assumption is that the retailer is going to at least attempt to pass this onto the consumer. And so on one side you have companies like Nike that are perceived to have pricing power and that could be helpful for someone like a Foot Locker as well,” he said.

“But when it comes to the department stores or some of the specialty retailers, such as a Gap … I think the perception there is that those guys will have much more difficulty passing that along,” he added.

Retailers complain the tax, which would tax imports and exempt exports, will drive up their costs and force them to raise prices to consumers. The National Retail Federation expects price increases of at least 1 percent, costing the average family as much as $1,700 a year.

A Gap store in New York.

Scott Mlyn | CNBC
A Gap store in New York.

While some big names such as Wal-Mart or department stores have historically tried to pass on rising costs to suppliers, the border tax is such a big change it will be hard to make it up that way, retail consultant and CNBC contributor Jan Kniffen told “Power Lunch.”

“This basically, on the average retailer, cuts the profitability in half,” he said.

He believes they would have to raise prices, on average, 10 percent to get back to even.

“If you’ve got great pricing power, this all works. If you don’t have pricing power, you are going to lose a lot of business or a lot of profitability or both,” Kniffen noted.

The border adjustment tax is part of the Republicans’ overall tax reform plan. President Donald Trump, who recently met with retail executives, has yet to definitively weigh in on the issue.

On Thursday, Treasury Secretary Steve Mnuchin told “Squawk Box” the administration is listening to an array of businesses that are concerned about the impact of the tax on their profits.

“We understand the concerns, we understand where people are, and we’re going to have a plan that addresses these concerns,” Mnuchin said.

— CNBC’s Elizabeth Gurdus contributed to this report.

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